China's yuan firmed on Tuesday, as investors cheered the easing of tensions in strained U.S.-China relations after a meeting of the heads of the world's top two economies on the sidelines of the G20 Summit.

It also helped to temper broader concerns about a stuttering Chinese economyunderscoreded by fresh data released earlier in the day, and kept the yuan on track to extend gains for the fourth day against the greenback. The People's Bank of China set the midpoint rate at 7.0421 per dollar prior to market open, firmer than the previous fix 7.0899.

The spot market opened at 7.0400 per dollar and was changing hands at 7.0506 at midday, 204 pips firmer than the previous late session close and 0.12% softer from the midpoint. The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day. "The meeting between Chinese President Xi Jinping and U.S. President Joe Biden at the side of the G20 Summit cooled cold war fears," DBS senior FX strategist Philip Wee and senior economist Radhika Rao wrote in a client note.

At the sidelines of the G20 Summit in Bali, Indonesia, both Xi and Biden pledged more frequent communications and agreed that U.S. Secretary of State Anthony Blinken will travel to Beijing for follow-up talks. China and the United States have clashed over a range of issues, spanning trade, technology and Taiwan, which Beijing considers its own territory. "With communication channels restarted, this should be taken as a positive outcome for the meeting," said Maybank analyst Saktiandi Supaat.

Back home, however, a raft of weak Chinese data released earlier, including factory output, retail sales and property investment highlighted the challenges for policymakers. The gloomy data capped gains in the onshore yuan, which rose to a near two-month high against the dollar Monday, bolstered by Beijing's move to help the embattled property sector and ease some of the country's strict COVID-19 containment measures.

"The weakening China hard data for October poured cold water on buoyant sentiment driven by the pivots on the COVID and property policies," said Ken Cheung, chief Asian FX strategist at Mizuho Bank. The offshore yuan was trading 0.02 percent away from the onshore spot at 7.049 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.877, 2.40 percent away from the midpoint.

Year NDFs are settled against the midpoint, not the spot rate. The global dollar index rose to 106.975 from the previous close of 106.66. The yuan market at 4:37AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 0.68% 7.0421 7.0899 Spot yuan 7.071 0.29% 7.0506 Divergence from midpoint* 0.12% Spot change YTD -9.87% Spot change since 2005 revaluation 17.39% Key indexes: Item Current Previous Change Thomson Reuters/HKEX 0.0 CNH index Dollar index 107.017 0.3 106.66 *Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint.

The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan * 7.049 0.02% Offshore non-deliverable 6.877 2.40% forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Georgina Lee Editing by Shri Navaratnam)


Reuters