Yuan rises for 3rd straight day, reflecting dollar weakness

    SHANGHAI, Dec 30 (Reuters) - The yuan advanced for a three
straight day on Wednesday, tracking broad dollar weakness, but
trade was thin as many investors stayed on the sidelines ahead
of the year-end holiday.
    The dollar slumped to multi-year lows against many
currencies as traders looked past a new delay in U.S. stimulus
cheques and maintained bets that additional financial aid was
still likely.
    "Most market participants are taking a wait-and-see approach
in the last few trading days of the year," said a trader at a
Chinese bank.
    In the spot market, the onshore yuan opened at
6.5302 per dollar and was changing hands at 6.5230 at midday, 70
pips firmer than the previous late session close.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.5325 per dollar, 126 pips
or 0.19% firmer than the previous fix of 6.5451. 
    The weaker dollar, the widening yield gap between China and
the United States and China's effective coronavirus containment
have underpinned the yuan, prompting it rebound about 10%
against the dollar since late May.
    For the year, the yuan is up nearly 7% and was set to book
its first annual gain in three.
    Yan Se, chief economist at Founder Securities in Beijing,
said he expected the yuan to appreciate further in 2021, but at
a mild pace.
    It would hard to rise past the highs hit in 2015, he said. 
    Authorities would not allow the yuan to rise past 6 per
dollar, a level that would pressure exports, he said.
    "With economic recovery in the United States, the dollar may
also rebound in the second half of next year," Yan said, adding
6.2 to 6.3 range could be reasonable for the yuan in 2021.
    The loftiest level the local unit reached in early 2015 was
6.18 per dollar.
    The PBOC said at its quarterly meeting that the yuan
exchange rate will be kept basically stable, according to an
online notice posted on Tuesday.
    The global dollar index fell to 89.778 at midday,
when the offshore yuan was trading at 6.5074 per
dollar. 
    
    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.5325   6.5451    0.19%
                                       
 Spot yuan          6.523    6.53      0.11%
                                       
 Divergence from    -0.15%             
 midpoint*                             
 Spot change YTD                       6.75%
 Spot change since 2005                26.88%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.06       95.09     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    89.778      90.001    -0.2
 
    
    
*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    6.5074    0.24%
        *                        
 Offshore              6.6635    -1.97%
 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 Winni Zhou and Andrew Galbraith; Editing by Kim
Coghill)