Yuan off March high as U.S.-China risks overshadow stock inflows

    HONG KONG, July 21 (Reuters) - The yuan was little changed
on Tuesday, trimming an early advance to a four-month top as
simmering tensions between Beijing and Washington undercut the
boost from extended inflows into the mainland stock market.
    The onshore yuan was steady from the previous
close, fetching 6.9923 per dollar at midday. The offshore yuan
 was also flat at 6.9890 per dollar. 
    The global dollar index wasn't much stronger either,
up just 0.04% at 95.779, as safe-haven flows into the U.S.
currency tapered off after European Union leaders reached a deal
to support their coronavirus-blighted economies, while hopes for
a vaccine against the pandemic also buoyed the mood.
    The yuan took advantage of the shaky dollar early in the
day, hitting its highest level since mid-March in both onshore
and offshore markets.
    Capital flowing into China's bond and stock markets as well
as the widening gap between interest rates China and the United
States have been supportive of yuan strength, Goldman Sachs said
in a report.
    "The recent net FX inflows seem likely to continue,
providing more support to the (Chinese) currency," said the
bank's analysts.
    Chinese stocks edged up, building on their 3% gains in the
previous session.
    Overall, however, the U.S.-China tensions kept a leash on
the yuan during the day, with some investors selling off into
the early morning strength.
    Traders in Shanghai said Sino-U.S. showdown over trade,
technology and human rights, as well as seasonal demand from
overseas-listed Chinese companies for foreign currencies to
deliver dividend put the brakes on the yuan.
    The U.S. Commerce Department on Monday added 11 Chinese
companies implicated in what it called human rights violations
in connection with China's treatment of its Uighurs in Xinjiang
in western China to the U.S. economic blacklist.
    Prior to the onshore open, the People's Bank of China set
the midpoint rate at 6.9862, the strongest since
March and a tad firmer than the Reuters estimate of 6.9912.

    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 92.55, weaker than the previous day's
92.71.    

    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.9862   6.9928    0.09%
                                       
 Spot yuan          6.9923   6.9915    -0.01%
                                       
 Divergence from    0.09%              
 midpoint*                             
 Spot change YTD                       -0.42%
 Spot change since 2005                18.37%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.55       92.71     -0.2
 Reuters/HKEX                          
 CNH index                             
 Dollar index    95.779      95.735    0.0
   
*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    6.989     0.05%
        *                        
 Offshore              7.1251    -1.95%
 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 Noah Sin;
Additional reporting by Jindong Zhang in Shanghai
Editing by Shri Navaratnam)