China yuan eases after Fed rate cut; stimulus hope pares losses

    (Updates at 0346 GMT)
       SHANGHAI, Sept 19 (Reuters) - China's yuan eased on
Thursday against broad strength in the dollar after the U.S.
Federal Reserve's outsized interest rate cut, although it
recovered almost all losses on hope that the Fed's easing
offered Beijing leeway on its own monetary policy.
    The Fed kicked off its easing cycle on Wednesday with a
larger-than-usual half-percentage-point cut that Chair Jerome
Powell said was meant to show policymakers' commitment to
sustaining a low unemployment rate now that inflation has eased.
    The onshore yuan was 0.07% lower at 7.0833 to the
dollar by 0346 GMT, after hitting a trough of 7.1099 earlier in
the session.
    Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate, around which the yuan
is allowed to trade in a 2% band, at 7.0983 per dollar, 59 pips
weaker than a Reuters' estimate of 7.0924.
    "The yuan should continue to lag in recovery versus the rest
of its peers because of China's economic fragility and the risk
that a Trump victory might spur greater yuan volatility because
of his tariff threats on China," Maybank analysts said in a
note.
    "Yuan should remain on the backfoot versus most other
developed market (DM) peers in the medium term and another 5%
fall in the trade-weighted index (TWI) from here into 2025 could
happen."
    A string of August economic data, including credit lending
and activity indicators, surprised to the downside in the
world's second largest economy. Faltering Chinese economic
activity has prompted global brokerages to scale back their 2024
China growth forecasts to below the government's official target
of about 5%.
    President Xi Jinping last week urged authorities to strive
to achieve the country's annual economic and social development
goals, state media reported, amid expectations that more steps
are needed to bolster China's flagging economic recovery.
    By 0346 GMT, the offshore yuan traded at 7.0838 yuan per
dollar, down about 0.03% in Asian trade, while the
dollar's six-currency index stood flat at 101.02.


    LEVELS AT 0346 GMT:
 INSTRUMENT   CURRENT  UP/DOWN(-)    % CHANGE    DAY'S   DAY'S
              vs USD   VS. PREVIOUS  YR-TO-DATE  HIGH    LOW
                       CLOSE %
 Spot yuan    7.0833   -0.07         0.26        7.0805  7.1099

 Offshore     7.0847   0.16          0.58        7.0819  7.1133
 yuan spot




 (Reporting by Shanghai Newsroom; Editing by Stephen Coates and
Tom Hogue)