SHANGHAI, March 22 (Reuters) - China's yuan eased against the dollar on Wednesday as investors awaited the outcome of the Federal Reserve's policy meeting. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8715 per dollar, 48 pips firmer than the previous fix of 6.8763. The onshore yuan opened at 6.8746 per dollar and weakened to 6.8870 at midday, 82 pips softer than the previous late session close. All eyes are on the Federal Open Market Committee (FOMC) meeting in the wake of the biggest meltdown in the banking sector since the 2008 financial crisis, with a rate decision due later on Wednesday, currency traders said. "If the Fed surprises the market with a more hawkish tone, there will be an opportunity to short USD. For the yuan, investors could consider hedging their positions at around 6.9 per dollar," traders at a Chinese bank said in a memo to clients. They expected the Fed to deliver a 25-basis-point interest rate hike and a softening of tone in light of the instability in the banking sector. U.S. Treasury Secretary Janet Yellen said on Tuesday she was focused on restoring the confidence of bank depositors and would not speculate on regulatory changes. "Fed Chair Jerome Powell will likely weigh in on Yellen's assurances that regulators had the back of uninsured depositors and would safeguard the banking sector," analysts at DBS said in a note. Ken Cheung, chief Asian FX strategist at Mizuho Bank, said U.S. regulators were ready to take steps to ensure financial stability so that the Fed could separately focus on fighting inflation. By midday, the global dollar index fell to 103.18 from the previous close of 103.256, while the offshore yuan was trading at 6.886 per dollar. The one-year forward value for the offshore yuan traded at 6.7347 per dollar, indicating a roughly 2.25% appreciation within 12 months. The yuan market at 0342 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.8715 6.8763 0.07% Spot yuan 6.887 6.8788 -0.12% Divergence from 0.23% midpoint* Spot change YTD 0.19% Spot change since 2005 20.18% revaluation Key indexes: Item Current Previous Change Dollar index 103.18 103.256 -0.1 *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 Instrument Current Difference from onshore Offshore spot yuan 6.886 0.01% * Offshore 6.742 1.92% non-deliverable forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Li Gu and Brenda Goh; Editing by Stephen Coates)
China's yuan eases ahead of Fed rate decision
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