SHANGHAI, Nov 9 (Reuters) - The yuan rose to a more than 28-month high against an easing dollar on Monday, underpinned by improving market sentiment as investors welcomed Joe Biden's election as U.S. president. Investors believed that a Biden presidency could mean less uncertainty in foreign and trade policy towards China and expected that he was unlikely to re-open the trade war, which has weighed on the Chinese yuan over the last two years. Onshore spot yuan opened at 6.5950 per dollar and jumped to 6.57 in early trade, the strongest since June 26, 2018. By midday, it was changing hands at 6.5825, 254 pips firmer than the previous late session close. Chinese state media also struck an optimistic tone in editorials on Monday reacting to the Democratic candidates victory, saying relations could be restored to a state of greater predictability and could start with trade. "We think RMB has priced in the pause of the escalation of U.S.-China trade war," Tommy Xie, head of Greater China research at OCBC Bank in Singapore, said in a note. "The near-term outlook of the currency may depend on the global risk sentiment as well as broad dollar trajectory. Nevertheless, a deeply divided U.S. as shown by the election this year is not really a good thing for China as the risk to find a common enemy to unite the divided nation is getting higher, which may shift the Biden Administration's foreign policy over the next four years." Several currency traders said the market refrained from testing new highs in the yuan after hitting the loftiest level in 28 months in initial trade. "Many have adopted a wait-and-see strategy," said a trader at a Chinese bank, saying investors were waiting for more clarity on Biden's policies before making further bets on the yuan. A second trader at a Chinese bank said investors were also cautious as the authorities might not tolerate such rapid gains in the yuan. Prior to market opening, the People's Bank of China (PBOC) set the midpoint at a 28-month high of 6.6123 per dollar, firmer than the previous fix of 6.6290. The global dollar index fell to 92.166 at midday from the previous close of 92.167. The offshore yuan was trading at 6.5703 per dollar by midday. The yuan market at 0402 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.6123 6.629 0.25% Spot yuan 6.5825 6.6079 0.39% Divergence from -0.45% midpoint* Spot change YTD 5.78% Spot change since 2005 25.73% revaluation Key indexes: Item Current Previous Change Thomson 95.66 95.35 0.3 Reuters/HKEX CNH index Dollar index 92.166 92.167 0.0 *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% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.5703 0.19% * Offshore 6.7399 -1.89% non-deliverable 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 Winni Zhou and Andrew Galbraith; Editing by Jacqueline Wong)
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