HONG KONG: China's yuan eased on Thursday as the dollar edged higher but trading was confined to a tight range as investors awaited more news from Sino-U.S. trade talks.
Chinese Vice Premier Liu He, who is in Washington for trade talks, will meet U.S. President Donald Trump on Thursday, the White House said.
Liu and his team would remain in Washington for three days and possibly longer to iron out the two sides' differences, White House economic adviser Larry Kudlow said n Wednesday.
A Reuters poll on Thursday showed that optimism about a U.S.-China trade agreement will likely help the Chinese currency to hold onto its recent gains against the dollar, and make a modest push forward over the coming year.
The yuan is up about 2.3 percent against the greenback so far this year, but is still well off the levels seen before the trade war began to escalate a year ago.
Should the two countries fail to reach a deal, however, an escalation in the trade war would drive manufacturing away from both countries and likely cause job losses, a International Monetary Fund report showed on Wednesday.
"The deal is not done yet, so there is no apparent factor for either appreciation or depreciation," said a trader with a foreign bank in Shanghai.
Spot yuan traded at 6.7139 per dollar at midday, 46 pips weaker than the previous late session close and 0.13 percent softer than the midpoint, mirroring a small rise in the U.S. dollar.
The People's Bank of China set the midpoint rate at 6.7055 prior to market open, firmer than the previous fix of 6.7194.
It is expected to firm 0.6 percent to 6.66 in a year, according to the latest Reuters poll of over 60 foreign exchange strategists taken over the past week.
On Friday, Chinese markets will shut for the Qingming Festival. The public holiday coincides with the release of non-farm payroll data in the United States, a key gauge of U.S. economy that may influence U.S. interest rate policy.
"There is a lot of external uncertainty that makes it hard to project the yuan's near-term direction," said a second Shanghai-based trader.
The yuan was expected to enjoy a lift from capital inflows, following the debut of some Chinese bonds on Monday in the Bloomberg Barclays Global Aggregate Index, one of the most widely tracked fixed income benchmarks.
"We are constructive on CNY because we believe that its drivers in 2019 are shifting from the current account to the capital account," analysts at Standard Chartered, who see the yuan trading at 6.65 by year-end, wrote in a note on Thursday.
However, "a lot of investors will choose to hedge their forex exposure," which would limit the impact on spot yuan market, said the first trader.
The offshore yuan was trading 6.7185 per dollar, down 0.08 percent from the previous close and 0.07 percent weaker than onshore spot.
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