SHANGHAI, June 24 (Reuters) - China's yuan held steady
around seven-month lows against the dollar on Monday and looked
set for its sixth straight monthly decline in June, pressured by
broad strength in the dollar and signs of weakness in the
world's second-largest economy.
    The currency has stayed within a whisker of the weak side of
its daily official trading band over the past week as capital
outflows into higher yielding dollars and speculation the
central bank is allowing it to depreciate weigh on sentiment.
    Spot yuan was trading at 7.2615 per dollar at
0256 GMT on Monday, within a very narrow range, as traders
waited for key economic data at home and other U.S. indicators
that will help shape Federal Reserve policy expectations. 
    Trading was also subdued as Asian markets watched the yen
creep closer to 34-year lows that prompted Japanese yen-buying
intervention in late April.
    The Chinese yuan is 2.2% weaker this year. It has been under
pressure since early 2023 as domestic woes around a moribund
property sector, weak consumption and falling yields drive
capital flows out of yuan, and foreign investors stay away from
its sickly stock market.
    The yuan is up more than 10% on the yen so far this year, a
major reason analysts suspect Beijing is massaging its own
currency lower over time.
    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 7.1201 per dollar, its
weakest level since November, 1,446 pips firmer than a Reuters'
estimate.
    The central bank has been gradually lowering its daily yuan
official guidance, well within market projections but with a
bias suggesting it is allowing some weakness, traders and
analysts said.
    Such yuan midpoint fixings "reinforced our view that the
PBOC is pursuing a very measured pace of yuan depreciation and
with the intent of still maintaining the yuan broadly stable,"
Christopher Wong, FX strategist at OCBC Bank, said in a note.
    Based on Monday's official guidance, the yuan is allowed to
weaken as much as 7.2625.
    The onshore yuan opened at 7.2604 per dollar and
quickly weakened to 7.2616, not far from a seven-month low of
7.2618 hit last Friday.
    In overnight cash settlement transactions, the yuan was
quoted at 7.2617 per dollar, implying it had already
hit the weak end of the band in the overnight tenor.
    The gradual weakness in the yuan against the dollar has
partly helped resolve the tension between the PBOC’s apparent
strong currency policy and its generally loose monetary
settings, said Alvin Tan, Asia FX strategist at RBC Capital
Markets.
    "Yet, Beijing retains a deep anxiety about financial
instability triggered by a weakening currency, with the
2015-2016 episode still fresh in mind," Tan said, referring to
China's one-off sharp yuan depreciation in August 2015 that
roiled the global financial markets.
    Separately, markets will pay close attention to economic
data from both home and abroad this week for a clearer picture
of the currency outlook.
    They will focus on the U.S. personal consumption
expenditures (PCE) price index, which serves as the Fed's
favoured gauge of inflation - due on Friday, along with China's
May industrial profits on the same day and June manufacturing
survey due on Sunday.
    
    Key onshore vs offshore levels:
    •Overnight dollar/yuan swap onshore -8.00 pips 
    •Three-month SHIBOR 1.9% vs. 3-month CNH HIBOR 3% 
    
    LEVELS AT 0256 GMT:
    
 INSTRUMENT  CURRENT  UP/DOWN(-)     % CHANGE      DAY'S   DAY'S 
             vs USD   VS. PREVIOUS   YR-TO-DATE    HIGH    LOW
                      CLOSE %                              
 Spot yuan   7.2615           -0.01          -2.2  7.2604  7.2616