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China's yuan bounces from 14-year low after PBOC verbal warning

          SHANGHAI, Sept 29 (Reuters) - China's yuan bounced on
Thursday from a 14-year low against the dollar hit in the
previous session, snapping eight straight days of losses, after
the central bank warned against speculative trading and heavy
one-way bets on the currency.
    The People's Bank of China (PBOC) said on Wednesday that
stabilising the foreign exchange market is the top priority, and
reiterated that the yuan has a solid basis to be basically
stable.
    The statement "illustrated PBOC's further concerns on the
rapid depreciation of the currency ... (though) the PBOC would
not defend a particular level of the exchange rate especially
given the depreciation was driven by continued appreciation of
the broad USD," analysts at Goldman Sachs said in a note.
    Prior to the market opening, the PBOC set the midpoint rate
 at 7.1102 per dollar, 5 pips firmer than the previous
fix of 7.1107.
    In the spot market, the onshore yuan opened at
7.1500 per dollar and was changing hands at 7.1903 at midday,
117 pips or 0.16% firmer than the previous late session close.
    The yuan hit a low of 7.2521 per dollar on Wednesday, the
weakest level since the global financial crisis of 2008.
    Its offshore yuan also rebounded from its lowest
level on record hit a day earlier to trade at 7.192 per dollar
by midday.
    Currency traders said a retreat in dollar index,
along with the PBOC's verbal warnings, helped lift the yuan in
morning deals.
    The rare strong tone of the verbal warning discouraged many
investors from testing new lows in the yuan, said a trader at a
foreign bank.
    Separately, the state-owned Securities Times said in a
front-page commentary on Thursday that the yuan is unlikely to
continue depreciating rapidly.
    Market participants usually view such official remarks and
state media commentaries as a sign that authorities are growing
uncomfortable with rapid currency movements.
    But some analysts said as long as the Federal Reserve
continues to raise interest rates aggressively to tame high
inflation, the yuan could still face pressure.
    "We expect upward pressure on USD/CNY to persist amid
aggressive Fed hikes," analysts
    "Even though the PBOC will continue to pace the rise in
USD/CNY, we expect upward pressure to take the pair to 7.20 by
early 2023."
    The yuan market at 0402 GMT:
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      7.1102   7.1107    0.01%

 Spot yuan          7.1903   7.202     0.16%

 Divergence from    1.13%
 midpoint*
 Spot change YTD                       -11.62%
 Spot change since 2005                15.11%
 revaluation
    Key indexes:
 Item            Current     Previous  Change

 Thomson                               0.0
 Reuters/HKEX
 CNH index
 Dollar index    113.262     112.604   0.6
 *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 percent from official midpoint rate it sets each
morning.
    OFFSHORE CNH MARKET
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    7.192     -0.02%
        *
 Offshore              7.0845    0.36%
 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 Brenda Goh; Editing by Kim
Coghill)

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