China's yuan eases while investors await convincing evidence on growth

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By Georgina Lee HONG KONG, March 28 (Reuters) - China's yuan weakened on Tuesday while holding to a narrow range, as investors waited on the sidelines for further evidence that the country is on track for a solid economic recovery after recent data gave mixed signals. The yuan meandered within a tight range of 133 pips during the morning in directionless trade. Some positive signs of recovery have emerged in China's property sector, where secondary home sales have picked up since the lunar new year in January due to pent-up demand, according to a recent Bank of America report. The sector suffered from a crisis of confidence last year when cash-strapped developers left large volumes of homes unfinished. But lackluster January and February data for profit at industrial firms, released on Monday, showed that the world's second-largest economy is still struggling to fully shake off the long-term effects of the COVID-19 pandemic. "The most important driver for the yuan is still about how China's economic recovery will continue to unfold. High-frequency data such as retail sales, mobility have shown that a recovery is well under way," said Seong Kiyong, lead Asia macro strategist at Societe Generale. The spot yuan rate opened at 6.8700 per dollar and was changing hands at 6.8816 at midday, 21 pips weaker than the previous late session close and 0.10% weaker than the midpoint. The People's Bank of China set the midpoint rate at 6.8749 per U.S. dollar prior to the market open, weaker than the previous fix 6.8714 and the lowest fixing in a week. The spot rate is allowed to trade within a range 2% above or below the official fixing on any given day. Investors will be closely watching the China purchasing managers' index due on Friday. If the data shows further expansion of the service and manufacturing sectors it will support the yuan, Seong said. He expects the yuan to stay firm between 6.7 and 6.8 per dollar in the next two months. The global dollar index fell to 102.591 from the previous close of 102.857, sliding for a second day as receding fears of a full-blown banking crisis sapped demand for the safest assets. Investors found brief relief from U.S. lender First Citizens BancShares' deal to buy failed peer Silicon Valley Bank on Monday, whose collapse this month triggered the worst banking turmoil since the 2008 global financial crisis. The offshore yuan was tracking closely with the onshore spot at 6.8819 per dollar. The one-year forward value for the offshore yuan traded at 6.7278 per dollar, indicating a roughly 2.29% appreciation within 12 months. The yuan market at 3:34AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.05% 6.8749 6.8714 Spot yuan -0.03% 6.8816 6.8795 Divergence from midpoint* 0.10% Spot change YTD 0.27% Spot change since 2005 revaluation 20.27% OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan * 0.00% 6.8819 Offshore non-deliverable 2.19% forwards 6.7274 ** *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 Georgina Lee; Editing by Edmund Klamann)