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Yuan recovers from 3-wk low as premier pledges to support economy

Kitco News

SHANGHAI, March 15 (Reuters) - The yuan briefly fell to a three-week low against the dollar on Friday but recovered by midday as Premier Li Keqiang pledged not to let economic growth fall below a reasonable range.

Li also said China hopes trade talks with the United States can achieve results.

Li's comments at the close of the annual parliament meeting came a day after data which pointed to a further slowdown in the world's second-largest economy, despite a flurry of support measures in recent months. The yuan had recoiled in early trade on news that a meeting between U.S. President Donald Trump and Chinese President Xi Jinping to seal a trade deal had been delayed. The yuan's movements are likely to remain highly captive to news from the trade negotiations in coming weeks, Zhou Hao, analyst at Commerzbank in Singapore, said in a note.

Prior to the market opening on Friday, the People's Bank of China (PBOC) set the midpoint rate at 6.7167 per dollar, 158 pips or 0.24 percent weaker than the previous fix of 6.7009.

The move in the official guidance rate was the biggest one-day weakening in percentage terms since Feb.12.

In the spot market, the onshore yuan opened at 6.7230 per dollar and eased to a low of 6.7301, the weakest level since Feb. 22.

As of midday, the onshore spot yuan was changing hands at 6.7204, 36 pips firmer than the previous late session close but 0.06 percent softer the midpoint.

If the yuan closes the late night session at the midday level, it would have finished the week flat, after a loss of 0.18 percent a week earlier.

"The general tone for the yuan market during the annual gathering of parliament is traditionally being stable. The spot yuan is likely to figure out its direction next week,"

The offshore yuan was trading at 6.7235 per dollar as of midday.

The yuan market at 0408 GMT:

ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.7167 6.7009 -0.24% Spot yuan 6.7204 6.724 0.05% Divergence from 0.06%
Spot change YTD 2.27% Spot change since 2005 23.15% revaluation

Key indexes:
Item Current Previous Change
Thomson 95.63 95.63 0.0 Reuters/HKEX
CNH index
Dollar index 96.65 96.785 -0.1

*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 6.7235 -0.05%
Offshore 6.7468 -0.45% non-deliverable

*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 Winni Zhou and John Ruwitch; Editing by Kim Coghill)

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