Yuan is stronger in terms of strong activity data, investors are waiting for a meeting of the Fed and the Sino-US state

    SHANGHAI, March 15 (Reuters) - China's yuan inched up
against the dollar on Monday, supported by strong industrial
output data, but gains were capped amid caution ahead of a U.S.
Federal Reserve policy meeting and talks between senior U.S. and
Chinese officials later this week.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.501 per dollar, 165 pips
or 0.25% weaker than the previous fix of 6.4845. 
    In the spot market, onshore yuan opened at 6.4950
and was changing hands at 6.5032 at midday, 56 pips firmer than
the previous late session close.    
    Traders said market had expected upbeat activity indicators
in the first two months of 2021 due to weak base effect caused
by coronavirus disruption during the same period a year earlier,
but some figures still surprised on the upside.
    China's industrial output growth quickened in
January-February, beating expectations, as the vast
manufacturing sector started 2021 on a firm footing and the
economy consolidated its brisk recovery.
    "Overall, the robust China data should help alleviate
concern over a slowdown of China growth for now after the
announcement on the conservative GDP target at above 6%," Ken
Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong,
said in a note.
    "Still, China's growth path will be full of uncertainties
throughout the year as the government refrains from pouring
sizable stimulus into the economy," he said.
    Gains in the yuan were capped, with the spot rate swinging
around 6.5 per dollar, as investors refrained from testing highs
when dollar's trajectory and China-U.S. policy under the Biden
administration remained unclear.
    Investors will be looking to the Fed meeting on March 16 and
17 for any comments about rising yields and the U.S. economic
growth outlook.
    They will also listen out for whatever comes out of a
meeting between U.S. Secretary of State Antony Blinken and top
Chinese officials on March 18 in Alaska. It will be the first
high-level in-person contact between the world's two largest
economies since U.S. President Joe Biden took office.
    Separately, China's central bank rolled over same amount of
maturing medium-term loans earlier in the session while keeping
the interest rate unchanged for an 11th straight
month.
    The global dollar index fell to 91.667 at midday,
while the offshore yuan was trading at 6.5064 per
dollar. 
    
    The yuan market at 0403 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.501    6.4845    -0.25%
                                       
 Spot yuan          6.5032   6.5088    0.09%
                                       
 Divergence from    0.03%              
 midpoint*                             
 Spot change YTD                       0.39%
 Spot change since 2005                27.27%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         96.8        96.87     -0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    91.667      91.68     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    6.5064    -0.05%
        *                        
 Offshore              6.6808    -2.69%
 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 Simon
Cameron-Moore)
  

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