SHANGHAI, July 4 (Reuters) - China's yuan rebounded on
Thursday from a 7-1/2-month low against the dollar hit a day
earlier, thanks to a slew of weaker-than-expected U.S. economic
data that raised investor bets on Federal Reserve interest rate
cuts later this year.
    At 0242 GMT, the onshore yuan traded at 7.2710
per dollar, up from a low of 7.2737 hit on Wednesday, which was
the weakest level since Nov. 14, 2023.
    Monetary policy divergence has been one of the key factors
weighing down the Chinese currency over the past few years, as
Beijing hinted at more easing measures to support the world's
second-largest economy.
    However, the gain in the yuan on Thursday was rather limited
as the strength was offset by a weakening Japanese yen and
seasonal corporate demand for foreign exchange, currency traders
said.
    Overseas-listed Chinese companies typically have to make
dividend payouts to their offshore shareholders between May and
August.
    Under the influence of multiple unfavourable factors such as
a strong U.S. dollar, continued depreciation of the yen and
dividend payouts, the yuan will continue to face downward
pressure, China Construction Bank said in a note.
    The lender added that measures to stabilise the currency
should limit the magnitude of yuan's weakness.
    The yuan has lost 2.3% against the greenback so far this
year. It has been under pressure since early 2023 as domestic
woes around a moribund property sector, anaemic consumption and
falling yields drive capital flows out of yuan, and foreign
investors stay away from China's struggling stock market.
    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 7.1305 per dollar. That was
1,351 pips firmer than Reuters' estimate.
    The offshore yuan traded at 7.298 yuan per dollar, up
about 0.09% in Asian trade.
    Separately, market participants were anxiously monitoring
developments around the central bank's potential treasury bond
trading in the secondary market after the PBOC said this week
that it would borrow treasury bonds from some primary dealers.
    The PBOC's selling of treasury bonds to stabilise long-term
rates is "supportive of the yuan but the currency direction
remains heavily influenced by Fed's monetary policy," UOB
economist Ho Woei Chen said in a note.
    "It is thus not to be seen as a liquidity tightening move as
PBOC's monetary policy remains biased towards easing in order to
boost the economic recovery prospects."
    Sources told Reuters that China's finance ministry on
Wednesday asked underwriters of this week's 30-year treasury
auction to resubmit their bids taking into account the central
bank's new bond borrowing plans.
 
Key onshore vs offshore levels:
    * Overnight dollar/yuan swap onshore -8.00 pips vs. offshore
-8.00
    * Three-month SHIBOR 1.9 % vs. 3-month CNH HIBOR 3
%

LEVELS AT 0242 GMT
 INSTRUMENT   CURRENT    UP/DOWN(-)    % CHANGE    DAY'S HIGH  DAY'S 
              vs USD     VS. PREVIOUS  YR-TO-DATE              LOW
                         CLOSE %                               
 Spot yuan    7.271      -0.01         -2.33       7.2679      7.2716