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Yuan briefly hits 1-week high on Sino-U.S. trade talks

    SHANGHAI, June 10 (Reuters) - China's yuan briefly hit a
one-week high against a weaker dollar on Thursday, with
investors encouraged by Chinese and U.S. commerce officials
agreeing to promote healthy trade and cooperate over differences
during discussions by telephone.
    China said on Thursday its commerce minister Wang Wentao
spoke to his U.S. counterpart Gina Raimondo, and both sides
recognised the importance of business exchanges and pledged to
keep lines of communication open.
    Prior to the market's open, the People's Bank of China
(PBOC) set the midpoint rate at 6.3972 per dollar, 16
pips weaker than the previous fix of 6.3956. 
    In the spot market, onshore yuan opened at 6.3840
per dollar and rose to a high of 6.38, the strongest level since
June 3. By midday, it was changing hands at 6.3854, 11 pips
firmer than the previous late session close.
    A trader at a foreign bank said the market would pay close
attention to U.S. inflation data due later in global day, which
could provide a clue to how fast the Federal Reserve will begin
tapering its monetary stimulus.
    Closer to home, PBOC governor Yi Gang told a forum in
Shanghai that said he expected China'ss annual average inflation
to be below 2% this year.
    Meanwhile, Pan Gongsheng, head of the State Administration
of Foreign Exchange, said two-way volatility in the yuan
exchange rate would become normal.
    By midday, the global dollar index rose to 90.197
from the previous close of 90.14, while the offshore yuan
 was trading at 6.3822 per dollar. 

    The yuan market at 0426 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.3972   6.3956    -0.03%
                                       
 Spot yuan          6.3854   6.3865    0.02%
                                       
 Divergence from    -0.18%             
 midpoint*                             
 Spot change YTD                       2.24%
 Spot change since 2005                29.62%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         97.96       97.73     0.2
 Reuters/HKEX                          
 CNH index                             
 Dollar index    90.197      90.14     0.1
 
    
    
*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    6.3822    0.05%
        *                        
 Offshore              6.5407    -2.19%
 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)
  
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