SHANGHAI, Sept 15 (Reuters) - China's yuan climbed to a 16-month high on Tuesday, as industrial output and retail sales data suggested a broader recovery from the coronavirus crisis was underway. "China's economic recovery from the coronavirus outbreak is quicker than other major economies, helping drive the yuan higher", said Wang Jianhui, chief economist at Capital Securities after August output data showed the fastest rise in eight months, and retail sales grew for the first time this year. Prior to market open, the People's Bank of China set the midpoint rate at 6.8222 per dollar, the strongest since May 13, 2019. Spot yuan opened at 6.7945 per dollar and firmed to 6.7855, its strongest in 16 months high, before slipping back to 6.7870 at midday, still 216 pips stronger than the previous late session close. Traders said the yuan break below the 6.8 per dollar level would prompt more dollar selling. The dollar dipped against riskier currencies on Tuesday as hopes for a COVID-19 vaccine and big corporate deals improved investor appetite for riskier currencies. "Market sentiment is relatively good, and the onshore yuan could further strengthen to around 6.7 per dollar," said a trader at a Chinese bank. Capital Securities' Wang doubted whether the yuan could sustain a straight-line ascent given the ongoing trade frictions with the United States. He expected the onshore yuan to trade in range of 6.6 to 7.1 per dollar for the mid-term. Investors were also eyeing the outcome of policy meetings by several major central banks later this week. The U.S. Federal Reserve will start a two-day policy meeting on Tuesday, the first since its shift in August to a more inflation tolerant stance. The Bank of Japan and the Bank of England announce their respective policy decisions on Thursday. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.85, firmer than the previous day's 93.38. The global dollar index fell to 92.916 from the previous close of 93.052. The offshore yuan was trading at 6.7855 per dollar by midday. One-year NDFs are settled against the midpoint, not the spot rate. The yuan market at 4:03AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.8222 6.8361 0.20% Spot yuan 6.787 6.8086 0.32% Divergence from -0.52% midpoint* Spot change YTD 2.60% Spot change since 2005 21.95% revaluation Key indexes: Item Current Previous Change Thomson 93.85 93.38 0.5 Reuters/HKEX CNH index Dollar index 92.916 93.052 -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 6.7855 0.02% * Offshore 6.944 -1.75% 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 Luoyan Liu, Jindong Zhang and Andrew Galbraith; Editing by Simon Cameron-Moore)
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