China's yuan jumps to one-month high on positive trade developments with US

SHANGHAI, Oct 27 (Reuters) - China's yuan jumped to a more-than-one-month high against the dollar on Monday, boosted by positive developments around trade relations between Beijing and Washington.

The Chinese currency, traded both onshore and offshore, strengthened past the psychologically important 7.11 per dollar to levels last seen in September after top Chinese and U.S. economic officials hashed out on Sunday the framework of a trade deal for U.S. President Donald Trump and Chinese President Xi Jinping to decide on later this week.

The trade optimism also drove China and Hong Kong stocks higher. .SS

Sentiment was also underpinned by the central bank persistently guiding the market higher by setting the official midpoint firmer than expected, currency traders and analysts said.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0881 per dollar, its strongest since October 15, 2024, and 265 pips firmer than a Reuters' estimate CNY=RTRS of 7.1146.

The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.

"China has seen fit to basically fix the CNY at the strongest level in over a year. Whether or not that means FX was part of the discussions over the weekend, I think it's possibly more than mere coincidence," said Ray Attrill, head of FX strategy at National Australia Bank.

In the spot market, the onshore yuan CNY=CFXS rose to a high of 7.1083 per dollar, the strongest level since September 18, before trading at 7.1124 as of 0223 GMT.

Its offshore counterpart CNH=D3 followed suit and advanced to a high of 7.1091, the strongest level since September 19. It last fetched 7.1128 as of 0223 GMT.

However, gains were capped as some analysts said the latest signs of de-escalation of trade tensions were well expected by investors.

"In the near term, both sides are still reliant on one another, and both are buying time to reduce this reliance," said Ting Lu, chief China economist at Nomura.

"We view this cycle of tension, escalation and truce as the new normal for U.S.-China relations. We are not surprised to see the truce again, and we won't be surprised to see another escalation in the next couple of months."