China's yuan eases as investors weigh property rescue measures

China's yuan eased slightly against the dollar on Monday, as investors studied Beijing's latest measures to rescue its beleaguered property sector, which has been a key drag on the world's second-largest economy.

Beijing announced "historic" steps on Friday to stabilise its crisis-hit property sector, with the central bank facilitating 1 trillion yuan ($138.30 billion) in extra funding and easing mortgage rules, and local governments set to buy some apartments.

But analysts said details of how the plan would work were still being awaited.

"After Friday's announcement, there are a few factors yet to be disclosed and verified before we treat this as a substantial pivot in governmental policy," analysts at Barclays said in a note.

They said they would be looking to the extent of the government guarantee, the pricing mechanism and the policy life of such measures to be implemented.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate USDCNY, around which the yuan is allowed to trade in a 2% band, at 7.1042 per dollar, 3 pips firmer than the previous fix of 7.1045.

Despite the slightly firmer yuan midpoint, the central bank continued its months-long practice of setting the rate at levels firmer than market projections, widely viewed by traders as an attempt to keep the currency stable.

Monday's official fixing was 1,120 pips stronger than a Reuters estimate (CNY=RTRS) of 7.2162.

In the spot market, the onshore yuan USDCNY opened at 7.2285 per dollar and was changing hands at 7.2307 at midday, 53 pips softer than the previous late session close.

Currency traders also noted that dollar buying demand remained high to pile some downside pressure on the local currency, adding that the traditional dividend payment season was looming and rebounds in the yuan could be quickly offset by such foreign exchange needs.

Overseas-listed Chinese companies usually have to make such foreign exchange purchases to fulfill dividend payouts to their offshore shareholders between May and August. HSBC expects $66 billion worth of dividends to be made this year.

Separately, investors took China's decision to leave benchmark lending rates unchanged in stride, as monthly fixings of loan prime rate (LPR) came in line with market expectations.

By midday, the global dollar index DXY rose to 104.476 from the previous close of 104.445, while the offshore yuan USDCNH was trading at 7.239 per dollar.

The yuan market at 0309 GMT:

ONSHORE SPOT:

*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 morning.

OFFSHORE CNH MARKET

*Premium for offshore spot over onshore USDCNY

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. USDCNY.

($1 = 7.2308 Chinese yuan)