China's yuan holds steady as US trade truce deadline approaches

SHANGHAI, Aug 8 (Reuters) - China's yuan held steady on Friday as investors anxiously awaited news on whether a tariff truce would be extended between the world's two largest economies, after U.S. President Donald Trump floated the possibility of raising tariffs on China.

China was initially singled out with tariffs exceeding 100% and has until August 12 to reach an agreement with the White House to keep Trump from reinstating additional import curbs imposed during tit-for-tat tariff exchanges in April and May.

The Chinese currency has moved in a very narrow range this week as traders await developments and assess trade deals that Washington has struck with other countries. Trade relations with the United States were among the key factors weighing on the yuan's outlook, currency traders said.

Trump said this week he could announce further tariffs on China similar to the 25% duties announced earlier on India over its purchases of Russian oil.

Meanwhile, U.S. Commerce Secretary Howard Lutnick said he felt an agreement was possible, when asked about extending the tariff truce.

As of 0325 GMT, the onshore yuan CNY=CFXS was 0.01% lower at 7.1823 per dollar, while its offshore counterpart CNH=D3 was down about 0.04% in Asian trade to 7.1850.

Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.1382 per dollar, 360 pips firmer than a Reuters' estimate CNY=RTRS of 7.1742. The spot yuan is allowed to trade up to 2% either side of the fixed midpoint each day.

Based on Friday's midpoint guidance rate, the CFETS yuan basket index .CFSCNYI, a gauge that measures the yuan's value versus its major trading partners, touched a near two-week low of 96.04 and down 5.35% year-to-date.

The yuan has strengthened 1.6% versus the softening dollar so far this year, as the central bank continued to anchor yuan stability against the greenback, prompting the local currency to weaken versus its peers.

"The sizable yuan depreciation against a basket of currencies has made Chinese exports more competitive," Barclays analyst said, referring to China's robust exports so far this year.

Separately, markets are also awaiting China's inflation data due on Saturday and credit growth data next week for more clues on the health of the economy.

"Consumer price index inflation is expected to teeter back into deflation at -0.1% year on year as downward pressures persist," said Lynn Song, chief economist for Greater China at ING.

"Measures to tackle excessive price competition are unlikely to have an impact in the early going."

LEVELS AT 0325 GMT: