China's yuan firms as dollar slips on vaccine concerns

    SHANGHAI, Nov 11 (Reuters) - The yuan firmed on Wednesday as
the dollar pulled back on tempering optimism about a COVID-19
vaccine, and as China's recovering economy and high-yielding
assets continued to attract inflows.
    The rise came despite a weaker daily fixing of the yuan's
daily midpoint. The People's Bank of China (PBOC() set that rate
 at 6.607 per dollar on Wednesday, weaker than the
previous fix of 6.5897, which was its strongest level since June
27, 2018.
    Spot yuan opened at 6.6050 per dollar and was
changing hands at 6.5951 around midday, 209 pips stronger than
Tuesday's late session close. 
    While lower than a 28-month high of 6.5630 touched on Monday
as the market welcomed Joe Biden's election as U.S. president,
analysts and traders continue to see more upside for the
    "Fundamentals and flows are driving the yuan. China
continues leading the global economic recovery and the yuan
retains its yield advantage over the dollar," said Qi Gao, Asia
FX strategist at Scotiabank in Singapore.
    China has made a rapid recovery from a deep
coronavirus-induced slump early in the year, with resilient
exports and manufacturing activity, though soft inflation data
released Tuesday showed some upstream demand remains tepid.

    The offshore yuan strengthened to 6.5873 per dollar
from its previous close of 6.5985. 
    Initial optimism that an experimental vaccine developed by
Pfizer Inc and Germany's BioNTech was 90%
effective had boosted the dollar on Tuesday, but traders took a
cooler view Wednesday as logistical issues around the vaccine's
distribution became clear even if it wins regulatory approval.
    The vaccine must be shipped and centrally stored at minus 70
degrees Celsius, presenting problems for countries that lack the
necessary refrigeration equipment.
    The global dollar index fell to 92.643 from the
previous close of 92.726. 
    "The market overreacted to the vaccine news, if there's no
better news in the future, I fear the market must reverse," said
a trader at a Chinese banks. "Yuan assets are still fragrant,
real asset allocation demand is still going to come in and buy
the yuan."

    The yuan market at 4:03AM GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.607    6.5897    -0.26%
 Spot yuan          6.5951   6.616     0.32%
 Divergence from    -0.18%             
 Spot change YTD                       5.58%
 Spot change since 2005                25.49%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         95.75       95.64     0.1
 CNH index                             
 Dollar index    92.643      92.726    -0.1
*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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.5873    0.12%
 Offshore              6.7581    -2.24%
*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 Andrew Galbraith and Jindong Zhang; Editing by
Kim Coghill)