Yuan gains slightly on global dollar pullback

* Yuan up 0.02 pct at 6.2166 near midday

* PBOC favors stability amid currency war fears

* Traders cautious after puzzling trade data

* Corporate yuan demand strong

SHANGHAI, March 12 (Reuters) - China's yuan edged up against the dollar on Tuesday after the greenback slipped in global markets, as market participants remain cautious due to mixed signals from recent economic data. Spot yuan changed hands at 6.2166 per dollar near midday, up 0.02 percent from Monday's close. The tiny gain in the spot rate came after the People's Bank of China (PBOC) set its daily midpoint 0.04 percent stronger at 6.2746. The stronger midpoint followed the PBOC's typical pattern of setting the yuan firmer in response to a fall in the dollar index, which weakened 0.05 percent overnight. Yuan demand from Chinese corporates remains strong, but traders are cautious about bidding up the Chinese currency, as the central bank has signaled its preference for stability amid fears of a currency war. The Japanese yen hit a new 3-1/2 year low versus the dollar on Tuesday morning, while the Korean won was also under pressure. Also restraining the yuan from stronger gains is a degree of skepticism about Chinese trade data released on Friday showed exports growing much faster than expected in February. Especially strong growth in exports to Europe and Hong Kong - despite data from those economies indicating stagnant domestic demand - raised suspicion that some firms were inflating export invoices in order to skirt capital controls and profit from a rally in the stock and property markets. If export figures were inflated by hot money inflows, the trend could be less supportive for the yuan in the medium term, since such flows are volatile and could dissipate amid a correction in the stock market, new measures to crack down on property speculation, and macro-economic data suggesting that the broader economic recovery is uneven.

The onshore spot yuan market at a glance:

Item Current Previous Change

(pct)

PBOC midpoint 6.2746 6.2769 +0.04% Spot yuan 6.2166 6.2181 +0.02%

Divergence from midpoint* -0.92%

Spot change ytd +0.22% Spot change since 2005 revaluation +33.14% *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 1 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

The offshore yuan market at a glance:

Instrument Current Difference from

onshore (pct)

Offshore spot yuan 6.2060 *0.17%

(pct)

Offshore non-deliverable 6.3040 **-0.47%

forwards

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .

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MARKET DRIVERS - China's trade surplus surged in late 2012, but the surge was mainly due to weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Corporate yuan purchases in recent months reflect strong yuan appreciation expectations. GRAPHIC: http://link.reuters.com/syx74t

- Hot money inflows, which should support yuan appreciation, returned in Jan following nine straight months of outflows. GRAPHIC: http://link.reuters.com/raz74t - Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t

RECENT DEVELOPMENTS - China eyes market forces to drive FX reform

- Bank of China extends yuan deposits to promote redback's rise - Taiwan yuan bonds may be dogged by policy barriers

- China restrains yuan rise in response to Asian currency weakness - Spot yuan has rallied strongly since late July 2012, and the PBOC is using its daily midpoint to restrain further appreciation. GRAPHIC: http://link.reuters.com/pyx74t

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(Editing by Sanjeev Miglani)