By Georgina Lee
       HONG KONG, July 6 (Reuters) - China's yuan firmed
against the dollar on Thursday after the central bank offered
more reassurances to markets worried by the currency's recent
sharp falls.
    "Even if the yuan exchange market has a panic unilateral
trend, there are abundant tools to calm the 'herd effect' and
ensure the smooth operation of the foreign exchange market," the
Financial News, a publication backed by the People's Bank of
China (PBOC), said on Wednesday.
    That reassurance was immediately followed up by action on
Thursday as the central bank set another stronger-than-expected
midpoint fixing for the fourth-straight day this week, which
traders believe is an attempt to prevent the yuan from weakening
too fast and too far.
    The PBOC set the midpoint rate at 7.2098 per U.S.
dollar prior to market open, weaker than the previous fix of
7.1968, but 400 pips firmer than Reuters' estimates. 
    It was the strongest deviation seen so far since the central
bank started setting the midpoint fixing higher than estimates
since the end of June. 
    "We expect broad yuan stability going forward, supported by
a tightening on (various) policy measures," said DBS analysts in
a research note on Thursday, citing the use of the daily fixing
as an example.  
    Spot yuan opened at 7.2507 per dollar and was
changing hands at 7.2489 at midday, 31 pips stronger than the
previous late session close and 0.54% weaker than the midpoint.
    The spot rate is allowed to trade with a range 2% above or
below the official fixing on any given day.
    The Financial News commentary on Wednesday was one of the
strongest verbal pledges to keep the yuan stable in the current
sell-off since May.
    That, coupled with the strong daily fixings this week, 
signals that the PBOC is keen to anchor the midpoint fixing at
7.19 to 7.2 per dollar "so that the spot yuan won't weaken
further to the 7.3 level," said Ken Cheung, chief Asian FX
strategist at Mizuho. 
    The closely watched 7.3 level was last reached in early
November 2022, when China's growth outlook was still undermined
by its strict zero-COVID policy. 
    "But now China has reopened, and the U.S. is nearing the end
of its hiking cycle, further weakening of the yuan to the
7.3-level looks unjustified," said Cheung. 
    Investors will also be looking for signals from Janet
Yellen's first trip to China as U.S. Treasury Secretary starting
later in the day. It will focus on recalibrating ties between
the world's two largest economies as military communications
remain frozen and Beijing's new restrictions on exports of some
metals spark fresh tensions, weighing on Chinese markets.
    The global dollar index fell to 103.35 from the
previous close of 103.373. 
    The offshore yuan was trading 0.16% away from the
onshore spot at 7.2603 per dollar. 
   The one-year forward value for the offshore yuan
traded at 7.0461 per dollar, indicating a roughly 3.04%
appreciation within 12 months.    


    The yuan market at 2:51AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint                         
                                        -0.18%
                    7.2098   7.1968    
                                       
                                       
 Spot yuan                             
                                7.252   0.04%
                    7.2489             
                                       
                                       
 Divergence from                       
 midpoint*                             
                    0.54%              
 Spot change YTD                       
                                        -4.81%
 Spot change since 2005                
 revaluation                            14.18%
 
    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan              
        *                        -0.16%
                       7.2603    
                                 
                                 
 Offshore                        
 non-deliverable                 2.45%
 forwards              7.0375    
               **                
                                 
 
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint.
. 
    

       

 (Reporting by Georgina Lee; Editing by Kim Coghill)