China's yuan eases as traders await inflation data; HK dollar nears 7.8

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    SHANGHAI, Nov 9 (Reuters) - China's yuan pulled back on
Tuesday after touching an 11-day peak in early trade, but moves
were muted as traders focused on upcoming inflation data from
the U.S. and China for clues to the timing of interest rate
hikes.
    Traders said while there was little room for a clear break
higher given broad dollar strength, the yuan continued to enjoy
short-term support after stronger-than-expected trade data
released on Sunday.
    "There's still upside pressure from FX sales toward the year
end, so we're bullish on the yuan and could see it touching June
highs. The Fed may not hike as quickly as imagined," said a
trader at a Chinese bank. 
    For its part, China's central bank will likely move
cautiously on loosening monetary policy to bolster the economy,
as slowing economic growth and soaring factory inflation fuel
concerns over stagflation, policy sources and analysts said.

    Before the market open, the People's Bank of China set the
yuan's daily midpoint at 6.3903 per dollar prior to
market open, its firmest in nearly two weeks. 
    That helped spot yuan to strengthen in early
trade after opening at 6.3912 per dollar, pushing it to a top of
6.3888. By midday it had softened to 6.3958 per dollar, 28 pips
weaker than Monday's late session close.
    Offshore yuan also weakened to trade at 6.3936 per
dollar from Monday's close of 6.3886.
    A softening of the Hong Kong dollar echoed the
weaker yuan. It was trading at 7.7902, moving closer to the
psychologically key 7.8 level. Weakness in both currencies stood
in contrast to a rally in emerging market counterparts. 
    Ken Cheung, chief Asian FX strategist at Mizuho in Hong
Kong, said indebted Chinese property developers affected by
intensifying worries over a liquidity crisis in the sector might
be selling Hong Kong dollars to help them cope.
    "Potentially these developers could attempt to sell their
property development projects in HK to acquire the funding to
repay the USD bond," he said in a note. "If the HKD spot was
flow driven, the HKD selling should prove to be short-lived and
HKD spot will likely be capped below 7.80 handle."
    A think-tank under China's powerful state council met real
estate developers and banks in the southern city of Shenzhen on
Monday, a source with direct knowledge of the meeting told
Reuters.
    Beleaguered China Evergrande Group faces a hard
deadline for more than $148 million in bond interest payments on
Wednesday.
    

    The yuan market at 4:07AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.3903   6.3959    0.09%
                                       
 Spot yuan          6.3958   6.393     -0.04%
                                       
 Divergence from    0.09%              
 midpoint*                             
 Spot change YTD                       2.07%
 Spot change since 2005                29.41%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         100.56      100.7     -0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.988      94.054    -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    6.3936    0.03%
        *                        
 Offshore              6.5713    -2.75%
 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 Andrew Galbraith and Jindong Zhang; Editing by
Edwina Gibbs)