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Yuan slips with weaker midpoint as US dollar holds ground
[SHANGHAI] China's yuan eased against the US dollar on Tuesday, after a weaker daily fixing and as the greenback held ground following an overnight retreat amid escalating tensions over North Korea.
The People's Bank of China set the midpoint rate at 6.8849 per US dollar versus the previous day's fix of 6.8785.
The spot market opened at 6.8888 per US dollar and was at 6.8894 at midday, 59 pips weaker than the previous late session close and 0.07 per cent below the midpoint. The yuan is allowed to trade with a 2 per cent range above or below the official fixing.
"Today's market resembled yesterday's, which was stable with no big swings," said a trader from a Chinese bank in Shanghai, citing a steady greenback and weaker midpoint.
US Vice President Mike Pence warned North Korea on Monday that recent American military strikes in Syria and Afghanistan showed President Donald Trump's resolve should not be questioned, but Pyongyang vowed to continue missile and nuclear tests.
The global US dollar index shed 0.3 per cent overnight before steadying at 100.29 at midday.
The trader expected limited impact on the yuan from rising tensions over North Korea - despite US President Donald Trump linking the two.
Mr Trump on Sunday defended his reversal on whether to call China a "currency manipulator", saying on Twitter that China was helping with the North Korean problem.
"Why would I call China a currency manipulator when they are working with us on the North Korean problem? We will see what happens!" Mr Trump said on Twitter.
Analysts said China did not meet the criteria to merit the manipulator tag from the US Treasury Department in its semi-annual review.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.16, firmer than the previous day's 94.15.
The offshore yuan was trading 0.07 per cent away from the onshore spot at 6.8845 per US dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.0585, -2.46 per cent away from the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.