Yuan pulls back from one-year high after Trump-Xi meeting

SHANGHAI, Oct 30 (Reuters) - China's yuan retreated from a near one-year high against the dollar on Thursday, after U.S. President Donald Trump's long-awaited meeting with his Chinese counterpart met expectations but gave investors few new reasons for trade optimism.

After a near two-hour meeting with President Xi Jinping, Trump said he had agreed to reduce tariffs on China to 47% in exchange for Beijing resuming U.S. soybean purchases, keeping rare earths exports flowing and cracking down on the illicit trade of fentanyl.

The yuan advanced to a near one-year high of 7.0955 per dollar before the bilateral meeting and quickly retreated to give up all intraday gains.

The declines also come as major state-owned Chinese banks stepped up dollar buying while selling yuan at the same time in the spot market, people with knowledge of the matter said, dragging the local currency to the weaker side of the psychologically important 7.1 per dollar level.

The onshore yuan CNY=CFXS ended the domestic trading session at 7.1107 per dollar, down 0.16% from the previous late night close. Its offshore counterpart CNH=D3 traded at 7.11 as of 0830 GMT.

"Current progress (between China and the United States) is largely in line with expectations," said Zhaopeng Xing, senior China strategist at ANZ.

"Further trade agreements are anticipated during Trump's April visit to China. Given the significant unresolved differences that remain, fluctuations (in bilateral trade relations) cannot be ruled out in coming months."

Meanwhile, in the equity market, Chinese shares also pulled back from a decade high on Thursday as Trump and Xi concluded their high-stakes meeting in South Korea that had fuelled cautious optimism for a potential trade-war truce. .SS

"I believe investors will still follow the fundamentals while keeping a close eye on the technological competition between China and the United States," said Hao Zhou, chief economist at Guotai Junan International.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0864 per dollar, 21 pips weaker than the previous fixing but 192 pips firmer than a Reuters' estimate CNY=RTRS of 7.1056. The spot yuan is allowed to trade a maximum of 2% on either side of the fixed midpoint each day.

The spot market largely shrugged off the official guidance, which reflected broad dollar strength overnight in global markets as the Federal Reserve lowered interest rates as expected, though Chair Jerome Powell signalled it may be the last reduction this year.