A year on from depegging, yuan up 5.4 percent

One-hundred Yuan notes are seen in this picture illustration in Beijing March 22, 2011.

BEIJING/SHANGHAI (Reuters) - China's yuan closed flat against the dollar on Friday, meaning it has now gained more than 5.4 percent in the year since it was unshackled from a de facto dollar peg, a quicker gain than analysts had expected at the time.

After the People's Bank of China (PBOC) announced the end of the de facto dollar peg on June 19 of last year, economists and forex strategists polled by Reuters said they expected it to creep up to 6.58 per dollar by the middle of this year, for a gain of just 3.7 percent.

Instead, the PBOC has guided the yuan upwards against the U.S. currency by setting a string of record-high midpoints, the reference rate from which the dollar/yuan exchange rate may rise or fall half a percent on a given day.

It closed at 6.4744 per dollar on Friday, unchanged from the day before as dealers reported heavy dollar demand from foreign lenders.

But dealers said the yuan's long-term strong outlook was still intact, as inflationary pressure remains elevated and the government may continue to nudge the currency up to help fight stubbornly high prices.

"The yuan will continue to move on an ascending path, which would not be stopped by some temporary factors such as one particular day's supply and demand market situation," said a trader at a state bank in Beijing.

The currency hit a record high versus the dollar in morning trade after the PBOC fixed another record high mid-point, at 6.4716, but then settled back down to close flat.

The PBOC has continued to guide the yuan upwards via the daily midpoint this year, as Beijing keeps up its efforts to tame quickening consumer inflation, partly driven by firm global commodity prices.

China's headline consumer prices hit a 34-month-high of 5.5 percent in May and some economists expect inflation to climb as high as 6 percent in June.

"The positive impact of a stronger yuan is obvious right now, especially for curbing inflation, and the government is well aware of that," said a trader at a state bank in Shanghai.

"In this sense, yuan appreciation will not stop, at least in the short term," he added.

Offshore, one-year dollar/yuan non-deliverable forwards were bid at 6.3760 in late trade compared with Thursday's close of 6.4000. Their implied yuan appreciation in a year's time rose to 1.50 percent from 1.25 percent.

Onshore, dealers retained their forecast for the yuan to appreciate 5 to 6 percent against the dollar for all 2011. The currency has risen 1.78 percent since the start of this year.

Most onshore forex dealers do not expect any drastic moves on the currency, despite some speculation in global currency markets that the government could be planning some sort of move soon.

Instead, they expect it to continue with its gradualist approach, in part as a way of fending off undesired capital inflows.

"I think the government will mainly guide the yuan up at a steady rhythm and the chance of seeing a sudden acceleration of the pace is quite small," said a trader at another state bank in Beijing.

(Editing by Jacqueline Wong)