People's Bank of China

SHANGHAI, Feb 22 (Reuters) - The yuan eased on Monday, pressured by seasonal corporate dollar demand and with sentiment dented by China's potential plans to allow more capital outflows.

China will study the feasibility of allowing individuals to invest in securities and insurance products abroad, Ye Haisheng, the head of capital account management department at the State Administration of Foreign Exchange (SAFE), wrote in a state-owned publication published late on Friday. The amount will be within an annual quota of $50,000 per person.*:nL1N2KP0HN

Although the timeline for the plan is unclear, traders and analysts said the move suggests the authorities have become increasingly uncomfortable with the yuan's strength and growing concerns about bubble risk in some domestic markets.

In the spot market, onshore yuan CNY=CFXS opened at 6.4585 per dollar and was changing hands at 6.4625 at midday, 27 pips weaker than the previous late session close, in spite of a firmer midpoint fixing.

The People's Bank of China (PBOC) set the midpoint CNY=PBOC at 6.4563 per dollar, 61 pips firmer than previously.

Tommy Xie, head of Greater China research at OCBC Bank, said in a note the USD/CNY remained elevated above 6.45 this morning despite a retreat in the broadly stronger dollar.

"We think this concern is likely to be short-lived and the pressure for the pair to trend down remains unchanged."

Several traders said corporate dollar demand had picked up recently as manufacturing and business resumed after the week-long Lunar New Year holiday.

A trader at a Chinese bank said the market was wary of the global reflation trade against the backdrop of rising long-term U.S. Treasury yields, which could be a headwind for the yuan.

But its losses were capped by latest developments in Sino-U.S. relations, after senior Chinese diplomat Wang Yi said on Monday the United States and China could work together on issues such as climate change and the coronavirus pandemic if they repaired their damaged bilateral relationship.

Meanwhile, there was little reaction to China keeping its benchmark lending rate for corporate and household loans steady for the 10th straight month at its February fixing on Saturday, matching market expectations.*:nAZN00WOUR

The yuan market at 0401 GMT:

ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4563 6.4624 0.09% CNY=SAEC Spot yuan 6.4625 6.4598 -0