Yuan closes near record high on strong trade data, faster inflation

* C.bank sets firmest fix in 8 months after EUR/USD gains

* Market responds to higher trade surplus, faster inflation

* Appreciation expectations keep CNH premium near year-high

* Traders expect appreciation in Q1, but not beyond 6.20

(Updates to close)

SHANGHAI, Jan 11 (Reuters) - China's yuan surged to a record high on Friday after the dollar slumped against the euro and as the central bank signalled increasing tolerance for appreciation amid strong export and inflation data.

The yuan hit all-time intraday high of 6.2126 versus the dollar and closed at 6.2161, its firmest ever close and a gain of 0.13 percent over Thursday's close of 6.2244.

The strong gains occurred after the central bank set its daily midpoint at 6.2712, the strongest fixing since early May last year.

The PBOC's strong fixing was a response to a fall in the dollar overnight. The euro muscled to a one-week high against the dollar on Thursday after the European Central Bank gave no indication it would cut rates, while robust Chinese export data assuaged concerns about global growth.

China's export data, which showed the trade surplus rising to $32 billion compared to $20 billion in November, also supported the yuan both onshore and offshore.

The offshore yuan market is clearly signalling expectations of further near-term yuan gains.

After touching a record-high 6.1735, CNH was trading at an 6.1860 late on Friday afternoon, while the premium over onshore yuan was 0.49 percent. That was down slightly from Thursday's more one-year high of 0.65 percent but still much higher than the 2012 average of only 0.06 percent.

The central bank typically sets its fixing stronger in response to an overnight weakening of the dollar index, which tracks the greenback's value against a basket of currencies dominated by the euro.

But traders say that the magnitude of its response at the fixes in recent days also indicates an increased willingness by the PBOC to permit yuan appreciation.

Traders had reported strong corporate demand through late 2012, but the People's Bank of China (PBOC) used its midpoint to hold the yuan mostly stable since late November.

The PBOC allows the exchange rate can to rise or fall by no more than 1 percent from the midpoint it sets each morning.

China's trade surplus for 2012 rose to $232 billion compared to $155 billion in 2011, the first year-on-year rise since 2008.

Inflation data released Friday morning showed consumer prices rising 2.5 percent year-on-year in December, up from 2.0 percent in November.

Analysts say an uptick in inflationary pressures should boost authorities' tolerance for yuan appreciation, since a stronger currency could help to moderate price growth by lowering yuan-denominated prices for imported goods.

Traders now widely expect moderate appreciation in the first quarter this year, though most believe the yuan is unlikely to strengthen beyond 6.20 per dollar.

Many suspect that major state banks are still buying dollars on behalf of the central bank on an ad hoc basis in order to prevent what the PBOC would regard as excessive appreciation.

Such apparent intervention was clearly visible in mid-December. Traders say it has been scaled back, but has not disappeared since then.

(Editing by Simon Cameron-Moore & Kim Coghill)