SHANGHAI, May 29 (Reuters) - China's yuan dropped to the
lowest level in more than six months against the U.S. dollar on
Wednesday, after U.S. Treasury yields pushed to a near four-week
peak lifting the greenback higher.
    Traders have subsequently repriced their bets on the Federal
Reserve's policy path, caught off-guard by a sharp improvement
in a U.S. consumer confidence measure for May that drove
treasury yields and the dollar higher.
    The yuan touched 7.2487 per dollar in morning
trade, its lowest level against since Nov. 17, 2023.
    The currency is down 2.1% this year, pressured by relatively
low yields versus other currencies and a struggling property
market.
    "We cannot rule out a slow creep up for the USDCNH and
USDCNY given unfriendly geopolitical environment where trade
tensions are rising with the U.S. and EU," Maybank analysts
wrote in a note.
    Prior to the market's opening, the People's Bank of China
set the midpoint rate, around which the yuan is
allowed to trade in a 2% band, at 7.1106 per dollar, its weakest
since Jan. 23 and over 1,400 pips stronger than Reuters'
estimate.
    The spot yuan opened at 7.2470 per dollar and was
changing hands at 7.2483 at midday, 42 pips weaker than the
previous late session close and 1.94% away from the midpoint.
    "The 7.25-level is the current resistance level for the
onshore yuan against the dollar, as once this level breaks,
trading would be nearly halted," said a trader at an
international bank.
    The global dollar index rose to 104.728 from the
previous close of 104.614.
    The offshore yuan was trading 165 pips weaker than
the onshore spot at 7.2648 per dollar.
    
    The yuan market at 0321 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      7.1106   7.1101    -0.01%
                                       
 Spot yuan          7.2483   7.2441    -0.06%
                                       
 Divergence from    1.94%              
 midpoint*                             
 Spot change YTD                       -2.08%
 Spot change since 2005                14.19%
 revaluation                           
    
*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    7.2648    -0.23%
        *                        
 Offshore              7.031     1.13%
 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 Shanghai Newsroom; Editing by Sam Holmes)