By Georgina Lee
       HONG KONG, June 26 (Reuters) - China's yuan weakened
against the dollar as trading was limited within a narrow range
on Monday, after a stronger-than-expected central bank fixing
fueled speculation that the authorities' tolerance for yuan
weakness may be nearing its end.  
    China's onshore market restarted trading after the three-day
dragon boat festival last week. The onshore yuan quickly fell
past the 7.2 level per dollar in early trade as it tracked its
offshore counterpart, whose trading continued last Thursday and
Friday and ended the week at a seven-month low.
    The People's Bank of China set the midpoint rate
at 7.2056 per U.S. dollar before the market opened, weaker than
the previous fix of 7.1795. 
    The spot yuan opened at 7.2049 per dollar and was
changing hands at 7.2132 at midday, 311 pips weaker than the
previous late session close and 0.11% weaker the midpoint. The
spot rate is allowed to trade with a range 2% above or below the
official fixing on any day.
    "The stronger fixing may be sending a signal to the market
that the central bank and policy makers are watching the yuan
foreign exchange moves, especially with the recent breach of 7.2
level," said Christopher Wong, a currency strategist at OCBC.
    The offshore yuan was trading -0.03% away from the
onshore spot at 7.2152 per dollar.
    The currency has been weighed down by China’s faltering
economic growth and the wide interest rate differential between
the U.S. and China. Although in recent weeks China has cut loan
prime rates,  analysts said modest interest cuts alone would
have limited impact in stimulating weak household demand without
fiscal support measures. 
    "We still need to see how the fixing are set for the rest of
this week" for more evidence on whether more intervention is
forthcoming, said Khoon Goh, head of Asia research at ANZ.    
    The global dollar index fell to 102.748 from the
previous close of 102.903. The dollar was near a one-week high
on Monday against its major peers, after the abortive mutiny in
Russia over the weekend put investors on guard. 
    For this week, investors will be eyeing industrial profits
for May on Wednesday, and the official manufacturing and
non-manufacturing purchasing managers' index (PMI) for June on
Friday. 
    More disappointing data after the contraction shown in May's
manufacturing PMI will bolster expectations for additional state
action to support the economy.  
    The one-year forward value for the offshore yuan
traded at 7.005 per dollar, indicating a roughly 3.00%
appreciation within 12 months.
    

    The yuan market at 3:12AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint                         
                                        -0.36%
                    7.2056   7.1795    
                                       
                                       
 Spot yuan                             
                                        -0.43%
                    7.2132   7.1821    
                                       
                                       
 Divergence from                       
 midpoint*                             
                    0.11%              
 Spot change YTD                       
                                        -4.34%
 Spot change since 2005                
 revaluation                            14.74%
 

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan              
        *                        -0.03%
                       7.2152    
                                 
                                 
 Offshore                        
 non-deliverable                 2.79%
 forwards              7.0097    
               **                
                                 
 
*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)