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Yuan holds near 29-month high as dollar stays under pressure

    SHANGHAI, Nov 18 (Reuters) - China's yuan held near a
29-month high against the dollar on Wednesday as the U.S.
currency remained under broad pressure and after the central
bank set a stronger midpoint.
    The yuan finished the local session at its highest since
June 26, 2018 on Tuesday, despite dollar buying by major
state-owned banks in what some traders suspected was an effort
to slow the Chinese currency's advance on the 6.5-per-dollar
    Traders said the coronavirus outbreak and vaccine progress
remained in focus for market participants and expect yuan
strength to continue for now.
    The dollar index against a basket of major currencies
held steady at 92.436, after falling to a one-week low on
Tuesday. The outlook for the currency remains downbeat with the
Federal Reserve and U.S. Congress poised to do more to ease
COVID-19's economic damage.
    "Generally we are optimistic about yuan's further
appreciation on the back of dollar weakness due to Fed's
easing," said a trader at a Chinese bank.
    Prior to market open, the People's Bank of China set the
midpoint rate at 6.5593 per dollar, 169 firmer than
the previous fix of 6.5762, and the strongest since June 27,
    The spot market opened at 6.5540 per dollar and
was changing hands at 6.5538 at midday, 37 pips firmer than the
previous late session close.
    "China's capital outflows would decrease substantially as
it's difficult now for Chinese tourists to travel aboard amid
the second COVID-19 wave globally, providing some support for
the country's currency," said Bruce Yam, forex strategist at
brokerage Everbright Sun Hung Kai in Hong Kong.
    "Besides, the forming of China-backed RCEP, which still has
a long way to go, would also bolster yuan," he said. 
    Fifteen Asia-Pacific economies signed what could become the
world's largest free trade agreement on Sunday, covering nearly
a third of the global population and about 30% of its gross
domestic product.
    Separately, Premier Li Keqiang said on Tuesday China would
promote economic growth to a "reasonable" range and pursue
higher quality development. 
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 96.02, firmer than the previous day's
    The global dollar index fell to 92.422 from the
previous close of 92.433. 
    The offshore yuan was trading at 6.5512 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 6.721, -2.41 percent away from the midpoint.
    One-year NDFs are settled against the midpoint, not the spot

    The yuan market at 4:18AM GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.5593   6.5762    0.26%
 Spot yuan          6.5538   6.5575    0.06%
 Divergence from    -0.08%             
 Spot change YTD                       6.25%
 Spot change since 2005                26.29%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         96.02       95.95     0.1
 CNH index                             
 Dollar index    92.422      92.433    0.0
*Divergence of the dollar/yuan exchange rate. A 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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.5512    0.04%
 Offshore              6.721     -2.41%
*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 Luoyan Liu, Jindong Zhang and Andrew Galbraith;
Editing by Sam Holmes)