China's yuan inches higher on firmer PBOC guidance even as dollar rises

SHANGHAI, July 11 (Reuters) - China's yuan inched higher against the dollar on Friday, as the central bank set a much stronger guidance fix, in what investors interpreted as an official sign to keep the currency stable following U.S. President Donald Trump's new wave of tariffs.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.1475 per dollar, the strongest level since November 8, even as the greenback rose in global markets.

Friday's official midpoint guidance came in 296 pips firmer than a Reuters estimate CNY=RTRS of 7.1771, and the wide gap was interpreted as an official intention to prevent the yuan from rapid moves in either direction.

"The fixing surprised us," said a trader at a foreign bank, adding that the strengthening bias in the midpoint might be an effort to stabilise the currency and manage market expectations amid fluid global trade conditions.

The onshore yuan CNY=CFXS rose to a high of 7.1674 per dollar, the strongest level since July 7, before changing hands at 7.1686 as of 0348 GMT.

Its offshore counterpart CNH=D3 traded at 7.1693 per dollar, up about 0.13% in Asian trade.

The firmer-than-expected midpoint offset a rising dollar after more signs of upheaval in the global trade landscape, as Trump said he planned to impose blanket levies of 15% or 20% on most trade partners and 35% on Canada.

Separately, a lot of market attention has shifted to China's trade, second-quarter gross domestic product and other activity indicator releases due next week for a clearer picture of the health of the broader economy.

"With fiscal policy proving effective in the first half of the year and GDP growth remaining above 5%, we expect that fiscal support to focus on existing policy deployments in the third quarter rather than exploring new initiatives," said Andrea Yang, portfolio manager at J.P. Morgan Asset Management.

"Monetary policy will remain accommodative but on the sidelines, given that short-term deposit rates are nearing zero and net interest margins (NIM) are reaching record lows."

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -18.50 pips vs. offshore -18.50

• Three-month SHIBOR SHIBOR= 1.6 % vs. 3-month CNH HIBOR 1.7 %

LEVELS AT 0348 GMT: