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China's yuan set for best week in a year, snapping six weeks of losses

    SHANGHAI, May 20 (Reuters) - China's yuan eased on Friday
but still looked set for its biggest weekly gain in a year,
snapping six straight weeks of losses, reflecting broad dollar
weakness in global markets.
    There was little reaction to China's decision to cut its
benchmark reference rate for mortgages on Friday by an
unexpectedly wide margin, as Beijing seeks to revive the ailing
housing sector and boost the cooling economy.
    Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.7487 per dollar, 37
pips firmer than the previous fix 6.7524. 
    In the spot market, the onshore yuan eased from
an overnight high of 6.7095 per dollar to trade at 6.7274 at
midday, 167 pips or 0.25% away from the previous late session.
    If it finishes the late night session at the midday level,
it would have gained 0.93% against the dollar for the week, the
biggest weekly strengthening since late May 2021.
    Traders attributed the strength to recent dollar weakness.
    The dollar index, which measures it against six major
rivals, was down 1.5% for the week to 102.96, weighed down by a
retreat in Treasury yields and fatigue after the greenback's
breathless 10%, 14-week surge.
    The yuan had plunged more than 6% since late April, sudden
and deep losses for a currency that has long been tightly
managed and usually moves in thin ranges.
    But currency traders said corporate's dividend payments
could emerge soon to cap this week's gains.
    Offshore-listed Chinese firms usually have to buy dollars to
pay overseas shareholders from June to August, and such demand
could pile downside pressure on the yuan. Widespread COVID-19
lockdowns in many cities includng Shanghai has delayed some of
those transactions.
    "Speaking from the short-term trend, the yuan's depreciation
momentum has moderated," said Eva Yi, chief economist at Huatai
Securities. 
    Yi added that the yuan's performance would depend on the
domestic COVID-19 situation, changes to economic growth
prospects, and financial risks.
    By midday, the offshore yuan was trading at 6.7362
per dollar. 
    
    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.7487   6.7524    0.05%
                                       
 Spot yuan          6.7274   6.7107    -0.25%
                                       
 Divergence from    -0.32%             
 midpoint*                             
 Spot change YTD                       -5.54%
 Spot change since 2005                23.03%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         100.55      100.22    0.3
 Reuters/HKEX                          
 CNH index                             
 Dollar index    103.026     102.724   0.3
 
    
    
*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    6.7362    -0.13%
        *                        
 Offshore              6.7595    -0.16%
 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 Kim
Coghill)
  
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