Chinese yuan is close to one-month low after Fed signaled quicker end to stimulus

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    SHANGHAI, Sept 23 (Reuters) - China's yuan hovered near its
one-month low against the dollar on Thursday, as the Federal
Reserve's new policy projection of a quicker end to pandemic-era
stimulus underpinned the greenback in global markets.
    The dollar index rose to a one-month high after the
Fed said it would likely begin reducing its monthly bond
purchases as soon as November and signalled interest rate
increases may follow more quickly than expected.

    "It seems the gradual pace of normalisation may not be as
gradual as anticipated and that FoMC tilts more hawkish next
year," analysts at Maybank said in a note.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.4749 per dollar, 56 pips
weaker than the previous fix of 6.4693. 
    In the spot market, onshore yuan opened at 6.4717
per dollar and was changing hands at 6.4655 around midday, 21
pips weaker than the previous late session close.
    Traders said markets would pay close attention to the pace
of Fed tapering, which could affect the performance of the
dollar and other major currencies.
    A trader at a foreign bank said the yuan failed to test its
lows early on Thursday as investors took some profit on the
dollar gains.
    The downside for the yuan was also limited after the PBOC
injected 90 billion yuan ($13.92 billion) into the banking
system on Wednesday and an Evergrande unit said it had
"resolved" a coupon payment on an onshore bond, providing
markets with some relief.
    Evergrande still faces $83.5 million in dollar-bond interest
payments due on Thursday on a $2 billion offshore bond. 
    "The positive momentum was triggered by some better news on
the Evergrande front, with liquidity added into the system and
affirmations that the CNY bond payment would take place as
scheduled," ANZ said in a note.
    "With the repayment of the USD coupon due today still an
open question, risk remains in the system, but the market seems
to be coming to terms with it."
    Cash-strapped developer China Evergrande Group
said it held an internal meeting late on Wednesday, in which its
chairman urged company executives to ensure the quality delivery
of properties and redemption of wealth management products.

    After Wednesday's liquidity move, the PBOC injected a
further net 110 billion yuan through reverse repo operations
into the banking system on Thursday to boost liquidity at
quarter-end and ahead of the National Day holiday.
    The week-long public holiday starts on Oct. 1.
    By midday, the global dollar index stood at 93.348,
while the offshore yuan was trading at 6.4665 per
dollar. 

    The yuan market at 0403 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4749   6.4693    -0.09%
                                       
 Spot yuan          6.4655   6.4634    -0.03%
                                       
 Divergence from    -0.15%             
 midpoint*                             
 Spot change YTD                       0.97%
 Spot change since 2005                28.01%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         99.27       98.98     0.3
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.348      93.492    -0.2
 
    
    
*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    6.4665    -0.02%
        *                        
 Offshore              6.6523    -2.67%
 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.
. 

($1 = 6.4652 Chinese yuan)

 (Reporting by Winni Zhou and Andrew Galbraith; Editing by Ana
Nicolaci da Costa)
  


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