Yuan weakens to 3-week low as Trump leads Biden in battlegrounds

    SHANGHAI, Nov 4 (Reuters) - The yuan weakened to a more than
three-week low against a rising dollar on Wednesday, as some
preliminary results suggested President Donald Trump led
Democratic challenger Joe Biden in battleground states Florida
and Texas.
    Speculative bets that Biden would win the White House have
turbocharged the strongest yuan rally in years, as many
investors expected him to adopt a multilateral approach and less
likely to prolong a trade war.
    The yuan has been heavily affected by the Sino-U.S.
relations since the outbreak of the trade war in 2018. Morning
trade was volatile as onshore and offshore markets took cues
from the dollar's reaction to fast changing election dynamics.
    The onshore spot yuan opened at 6.6990 per dollar
and fell to a low of 6.7537 at one point, the weakest level
since Oct. 13. By midday, it had recovered to 6.7200, still 430
pips weaker than the previous late session close.
    Its offshore counterpart weakened about 1.5%
against the greenback in morning trade before recovering
slightly to 6.7309 per dollar by midday. 
    Yuan traders said many market participants trimmed their
pre-election positions for a Biden presidency in morning trade.
    "Markets seem to be pricing in better chances for Trump, or
at least a smaller chance of a blue wave," said Stephen Innes,
chief global markets strategist at axi.
    "It remains hard to tell who will win," said a trader at a
Chinese bank, expecting more volatility in the yuan over the
rest of the day.
    In the options market, implied volatility remained elevated
after overnight tenor hit a record high a day
    "In this context, continue to expect volatility in the RMB
space in the coming sessions," Terence Wu, FX strategist at OCBC
Bank, said in a note.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at an over one-week high of
6.6771 per dollar, 186 pips or 0.28% firmer than the previous
fix of 6.6957. 
    The global dollar index rose to 93.967 at midday from
the previous close of 93.133. 
    The yuan market at 0413 GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.6771   6.6957    0.28%
 Spot yuan          6.72     6.677     -0.64%
 Divergence from    0.64%              
 Spot change YTD                       3.62%
 Spot change since 2005                23.16%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         94.81       95.33     -0.6
 CNH index                             
 Dollar index    93.967      93.133    0.9
*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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.7309    -0.16%
 Offshore              6.89      -3.09%
*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 Simon