SHANGHAI, Sept 6 (Reuters) - China's yuan inched higher against a weaker dollar on Monday, as investors pushed back expectations for when the U.S. Federal Reserve will begin tapering its massive stimulus. However, gains were capped as sources told Reuters that some major Chinese state-owned banks were seen buying the greenbacks in the onshore spot market late on Friday. That had pushed the yuan sharply weaker, prompting some market participants to become cautious and wonder about the policy stance. Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at a more than 2-1/2-month high of 6.4529 per dollar, 48 pips or 0.07%, stronger than the previous fix of 6.4577. In the spot market, onshore yuan opened at 6.4550 per dollar and was changing hands at 6.4546 at midday, 39 pips firmer than the previous late session close. Some currency traders said the state bank actions on Friday could suggest authorities may want a stable currency for now due to uncertainties in overseas markets including Fed tapering. China's major state-owned banks often act as agents for the central bank in currency markets, but they also trade on their own behalf. The marginal strength in the yuan on Monday morning came as some traders saw chances for the Fed to announce the tapering of bond purchases in September became very narrow after the downbeat U.S. payrolls. Fed tapering could boost the dollar and pressure other major currencies, including Chinese yuan, as a shrinkage in yield premium could lead to capital outflows from emerging markets. However, Marco Sun, chief financial markets analyst at MUFG Bank, said the impact on the yuan could be rather limited this time round. "We believe capital outflows will be mostly reflected in the domestic stock market dominated by retail customers, rather than in the domestic bond market, which is dominated by institutional investors," he said, expecting overseas institutional investors to continue purchasing the Chinese government bonds to offset yuan's depreciation pressure. By midday, the global dollar index rose to 92.215 from the previous close of 92.11, while the offshore yuan was trading at 6.4475 per dollar. The yuan market at 0400 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4529 6.4577 0.07% Spot yuan 6.4546 6.4585 0.06% Divergence from 0.03% midpoint* Spot change YTD 1.14% Spot change since 2005 28.23% revaluation Key indexes: Item Current Previous Change Thomson 98.53 98.52 0.0 Reuters/HKEX CNH index Dollar index 92.215 92.11 0.1 *Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.4475 0.11% * Offshore 6.6225 -2.56% non-deliverable forwards ** *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 Winni Zhou and Andrew Galbraith; Editing by Lincoln Feast.)
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