Yuan strengthens, then eases as headlines on U.S.-China trade dispute weighed

SHANGHAI (Reuters) – China's first yuan rose on Wednesday, then eased after traders bought cheaper dollars and tried to weigh the possible impact of media reports saying Washington plans to raise tariffs on $ 200 billion of imported Chinese goods.

A Bloomberg report on Tuesday night said the United States and China were seeking to resume trade talks to defuse their battle over import tariffs.

Later media reports said the U.S. plans tariffs of 25 percent, instead of 10 percent, on $ 200 billion in Chinese imports. A source told Reuters that an announcement on Washington's tariff plans for China could come as early as Wednesday.

Prior to market opening, the People's Bank of China lowered the daily yuan midpoint to 6.8293 per dollar, 128 pips or 0.19 percent weaker than the previous fix of 6.8165.

Wednesday's fixing, the lowest since May 31, 2017, largely matched market forecasts, traders said.

In the spot market, the onshore yuan opened at 6.8220 per dollar and 6.7863.

Some traders said dollar-buying interest rose quickly after the rose rose 6.8 per dollar, and such demand erased the gains in the yuan.

The Chinese currency fell back to 6.8202 at midday, 21 pips weaker than the previous late session close.

Frances Cheung, Head of Asia Macro Strategy at Westpac in Singapore, said the market "Things to shrug off headlines on the market will evolve. Market may have been digested before China easing news, and shifted focus to the potential impact of pro-growth policy. "

The pro-growth policy refers to China's fulfillment of its annual economic growth target, while it pledged to maintain a proactive fiscal Tuesday, quoting a Politburo statement.

Ji Tianhe, China and FX strategist at BNP Paribas, said many market participants were "of two minds" during the current round of yuan depreciation.

China and the United States, and any signs of Sino-U.S. intensifying tension, he said.

The Thomson Reuters / HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.23, firming than the previous day's 92.92.

The global dollar index rose to 94.62 from the previous close of 94.493.

The offshore yuan was trading 0.18 percent weaker than the onshore spot at 6.8325 per dollar.

Offshore one-year non-deliverable forwards contracts (NDFs), traded at 6.8647, 0.52 percent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.