MNI CHINA MARKETS: Yuan Stronger; Rates Diverged; SH Down

     BEIJING (MNI) - The Chinese yuan climbed to 6.3265 against the U.S. dollar

from Friday's 6.3227 closing, following today's higher fixing.  

     PBOC set the yuan central parity rate vs the U.S. dollar at 6.3267 on

Monday, stronger than last Friday's 6.3436. PBOC has set the fixing stronger for

seven consecutive trading days. Today's fixing marks the highest since Nov 2,

2015.

***COMMENT: China International Capital Corporation (CICC) raised 2018 year-end

USD/CNY forecast to 6.18 from 6.28 on Monday, on the back of its downward

adjustment of 2018 USD index forecast. The CICC expects some of the ad-hoc

capital control measures to be lifted, especially those concerning individual FX

usage.

     Interbank market rates diverged after PBOC drained net CNY140 billion via

skipping open-market operations. 

  - 7-day repo average last at 2.8035%, lower than 2.9194% yesterday 

  - Overnight repo average 2.5526%, up from 2.5089% yesterday. 

     ***COMMENT: The PBOC returned to its "neutral and tight" bias after

unexpected largess in the past two weeks. Today was the third trading day that

the central bank skipped its OMOs, which has drained CNY530 billion. There is a

rumour that the PBOC asked the big banks to stop lending overnight capital to

non-banking institutions via "window guidance" on Friday.

     Yield on 10-year China government bonds last traded 3.9400%, up from

3.9350% close Friday: Wind Information 

The Shanghai Composite Index was down 0.54% to 3,538.98 in the morning section,

while the Hang Seng Index in Hong Kong fell 0.59% to 32,957.53.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

[TOPICS: M$A$$$,M$Q$$$,M$$FI$,MN$FI$,MN$FX$]