China's yuan eases, Fed decision and Powell comments in focus

SHANGHAI, March 19 (Reuters) - China's yuan eased against the dollar on Wednesday, with investors looking ahead to the Federal Reserve's policy decision due later in the session for more clues on the outlook for the U.S. economy, its currency and the impact on global markets.

Fed policymakers are widely expected to keep rates unchanged, but market participants are anxious to get a clearer picture of how U.S. President Donald Trump's trade policy would affect rate projections in the world's largest economy.

"Markets will pay close attention to Chair Jerome Powell's comments tonight," said a trader at a Chinese bank.

The Chinese yuan has benefited from recent dollar weakness, which has fallen nearly 4% for the month, pressured by Trump's erratic tariff moves and on fears of a recession in the United States.

"Facing the weaker dollar, the People's Bank of China (PBOC) adopted the same strategy as it did in recent years: It has held the yuan relatively steady against the dollar," said Larry Hu, chief China economist at Macquarie.

"As a result, the yuan depreciated against a basket of currencies."

By 0254 GMT, the onshore yuan CNY=CFXS was 0.1% lower at 7.2320 per dollar, while its offshore counterpart CNH=D3 traded at 7.2330.

The yuan's value against its major trading partners .CFSCNYI fell to a more than five-month low of 98.42 on Wednesday, losing more than 3% year-to-date, according to Reuters calculation based on official data.

Meanwhile, the spot yuan has gained about 1% to the dollar so far this year.

Prior to the market opening, the PBOC set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1697 per dollar, and 633 pips firmer than a Reuters' estimate CNY=RTRS of 7.2330.

Developments in trade relations with the United States continue to remain front and centre on investors' radar, weighing on sentiment, currency traders and analysts said.

The U.S. has slapped a range of tariffs on its trading partners, including China.

"But the response (from China) so far has been measured, as Beijing is still seeking negotiations that could hopefully lead to another trade deal," Macquarie's Hu said.

Markets are closely monitoring further developments in CK Hutchison's 0001.HK sale of most of its global $22.8 billion ports business, including assets near the strategically important Panama Canal, to a group led by BlackRock BLK.N, as it could affect the bilateral relations, traders said.

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -5.55 pips vs. offshore -5.55

• Three-month SHIBOR SHIBOR= 2 % vs. 3-month CNH HIBOR 2 %

LEVELS AT 0254 GMT: