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Yuan eases as Fed, PBOC policies set to diverge

    SHANGHAI, Aug 25 (Reuters) - China's yuan eased against a
firmer dollar on Wednesday, pressured by a weaker-than-expected
official guidance rate and market expectations of policy
divergence between China and the United States.
    The People's Bank of China (PBOC) set the midpoint rate
 at 6.4728 per dollar prior to the market open, 77
pips firmer than the previous fix of 6.4805, but a tad weaker
than Reuters estimate of 6.4697.
    "The midpoint rate is weaker than expected, as the PBOC
doesn't want the yuan to rise too quickly because of the shift
of USD Index," said a trader at a Chinese bank.
    In the spot market, the yuan opened at 6.4715 per
dollar and was changing hands at 6.4777 at midday, 72 pips
weaker than the previous late session close.
    Weakening Chinese economic data has boosted analysts'
expectations that policymakers will announce more easing
measures to boost activity, while central bank chief also
pledged to stabilize the supply of credit in a meeting on
Monday.
    As for the Fed, traders are awaiting clues from its Jackson
Hole Symposium later this week on when and how it will begin
tapering stimulus.
    "The policy divergence between the PBOC and Fed is clear,
and this should limit any RMB strengthening expectations in the
near term," said Terence Wu, FX strategist at OCBC. 
    "The essentially leaves the USD-CNH still locked in within
the 6.4500 to 6.5000 range."
    "We do not expect any major new guidance to be provided by
Fed Chair Powell at Jackson Hole, as the Fed continues to watch
the recent spread of the Delta variant across the U.S.," said
Mohammed Kazmi, Macro Strategist at Union Bancaire Privée. 
    The United States could get COVID-19 under control by early
next year if vaccinations ramp up, Dr. Anthony Fauci, the
nation's top infectious disease expert, said on Tuesday.

    The global dollar index rose to 93.013 from the
previous close of 92.913, while the offshore yuan was
trading at 6.4755 per dollar. 


    The yuan market at 0414 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4728   6.4805    0.12%
                                       
 Spot yuan          6.4777   6.4705    -0.11%
                                       
 Divergence from    0.08%              
 midpoint*                             
 Spot change YTD                       0.78%
 Spot change since 2005                27.77%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         98.83       98.82     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.013      92.913    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    6.4755    0.03%
        *                        
 Offshore              6.6488    -2.65%
 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 Jason Xue and Andrew Galbraith; Editing by Kim
Coghill)
  
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