September 8, 2017 / 10:10 AM / a year ago

China's yuan extends blistering rally, has gained 7.5 pct vs dollar in 2017

    SHANGHAI, Sept 8 (Reuters) - China's yuan on Friday extended
a blistering rally that has let it gain 7.5 percent against the
dollar this year, more than erasing the 6.5 percent loss it
suffered in 2016.
    The Chinese currency, coming back into the global spotlight,
on Thursday blew past the key 6.5 per dollar level for the first
time since May 2016, and on Friday it again had a hefty gain.  
    Spot yuan surged to 6.435 before weakening. At
the 4:30 pm (0830 GMT) official local close, the yuan was at
6.4617, the highest such close since April 2016.
    The market also has a night session, lasting until 11.30 pm
Shanghai time (1530 GMT).    
    If the spot yuan finishes the night session at the current
level, it will have gained around 1.5 percent this week, the
highest weekly gain since the currency was revalued in July
2005. In the previous week, the yuan strengthened around 1.4
    The Chinese currency has risen more than 2,600 pips since
the beginning of the August, an unusual run given it normally
moves in a narrow range.
    Chinese policymakers are beginning to worry about the
rallying yuan as exporters come under strain, policy insiders
told Reuters, a sign that the currency's gains might lose steam
as Beijing prepares for a crucial Communist Party gathering in
    Prior to Friday's market opening, the People's Bank of China
raised its official yuan midpoint for the 10th
straight session, to 6.5032 per dollar, the strongest since May
12, 2016. 
    The last time the midpoint had a stronger fixing for 10
consecutive days was in December 2010.
    But Friday's midpoint - 237 pips or 0.36 percent firmer than
the previous one of 6.5269 per dollar - was weaker than market
expectations, traders said.
    Their forecasts had suggested the guidance might be firmer
than 6.5 per dollar.
    The onshore spot yuan opened at 6.4800 per dollar
and was at 6.4617 by the domestic close, 233 pips stronger than
the previous late session close and 0.64 percent firmer than the
    As of 0830 GMT, the offshore yuan was trading 0.18
percent weaker than its onshore counterpart at 6.4731 per
    On Friday morning, official data showed that China's exports
rose by 5.5 percent from a year earlier, below market
expectations, while imports beat forecasts, growing 13.3 percent
last month.
    The August trade data had no impact on the spot yuan trade,
according to market participants. But analysts said the soft
China export figures should highlight the overshooting risk in
the yuan. 
    The yuan market at 0830 GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.5032   6.5269    0.36%
 Spot yuan          6.4617   6.485     0.36%
 Divergence from    -0.64%             
 Spot change YTD                       7.51%
 Spot change since 2005                28.09%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         96.55       96.41     0.1
 CNH index                             
 Dollar index    91.253      91.663    -0.5
*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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.4731    -0.18%
 Offshore              6.5965    -1.41%
*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 David Stanway; Editing by Richard
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