UPDATE 1-China c.bank reaffirms steady policy with fine-tuning

Tue May 6, 2014 8:32am EDT

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BEIJING May 6 (Reuters) - China's central bank said on Tuesday it would keep monetary policy steady with timely fine-tuning to help stabilise economic growth, while introducing greater yuan flexiblity.

The People's Bank of China will use a combination of policy tools to keep liquidity ample and maintain stable money market rates, it said in its first-quarter monetary policy implementation report.

"We will maintain appropriate liquidity and achieve reasonable growth in money supply, credit and social financing," the central bank said in the report published on its website, wwww.pbc.gov.

The central bank will use policy tools, including open market operations, reserve requirement ratios (RRR), and re-lending, re-discount, short-term liquidity operations, in a flexible way in response to economic changes, it said.

While maintaining its longstanding prudent monetary policy, the central bank has started to fine-tune its stance to support the slowing economy. Last month, the central bank cut RRR for rural banks and cooperative banks to shore up the weaker agricultural industry in the economy.

The PBOC also pledged to keep the yuan basically stable while pushing reforms to help introduce greater two-way flexibility in the currency.

The yuan hit a two-week high on Tuesday as traders suspected China's central bank of intervening to support the currency after it touched a 18-month low against the dollar last week.

In March, the central bank doubled the yuan's daily trading band against the dollar.

A survey conducted by the central bank during the first quarter showed that 92.5 percent of Chinese trading companies believed that the scope of yuan fluctuations was "acceptable", it said.

About a third of respondents in the survey expected the yuan to depreciate in the next half-year, while 66.9 percent believed the yuan would appreciate, the central bank said.

The PBOC also reiterated its pledge to push interest rate reforms, including expanding the interbank market for certificates of deposit(CDs).

It also pledged to take measures to maintain financial stability and reduce systemic risks. (Reporting by Kevin Yao; Editing by Ron Popeski)

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