China's yuan slips, heads for 2nd biggest monthly loss ever

* PBOC fixes midpoint at 6-month low for 2nd trading day

* State banks seen buying more dollars - traders

* C.bank may let yuan depreciate to 6.25/dollar - traders

* But yuan seen stabilising later in second quarter

SHANGHAI, March 31 (Reuters) - China's yuan eased against the dollar on Monday after the central bank fixed its official mid-point at a six-month low for the second straight trading day, putting it on course for its second-biggest monthly loss on record. There were signs that major state-owned banks continued buying dollars on Monday, a move traders say reflects the People's Bank of China's (PBOC) intention to guide the yuan towards further depreciation. Spot yuan stood at 6.2253 per dollar at midday, 0.21 percent weaker than Friday's close, after the PBOC fixed its mid-point at 6.1521, down 0.05 percent from the previous trading day. It also marked the official base rate's weakest level since Sept. 18. If the yuan closes at the midday level on Monday, it will have depreciated 1.3 percent against the dollar in March, the second biggest monthly loss since China established the domestic foreign exchange market in 1994. The yuan recorded its biggest monthly loss in February when the PBOC surprised the world by engineering a 1.4 percent fall in the currency, in what traders say was designed to punish speculators betting on non-stop yuan appreciation.

"In recent years, the first quarter is typically a weak season for China's foreign trade and exports, so it offers a good opportunity for the central bank to launch a campaign to fight against those who are long the yuan," said a trader at a Chinese commercial bank in Shanghai. "Foreign trade is expected to rebound in the second quarter and strengthen in the second half of the year, so the market widely expects the yuan to stabilise in the second quarter and rebound for the rest of the year," he said. Traders said the yuan was likely to fall to 6.25 versus the dollar in coming weeks, then rebound in the second quarter as the trade outlook improves. In a related development, China's foreign exchange regulator released data showing outstanding foreign debt of $863.2 billion at the end of last year, with outstanding short-term foreign debt standing at a high ratio of 78 percent of the total.

Traders, however, said the data had no immediate impact on trading on Monday.

The onshore spot yuan market at a glance:

Item Current Previous Change PBOC midpoint 6.1521 6.1490 -0.05% Spot yuan 6.2253 6.2122 -0.21% Divergence from midpoint* 1.19% Spot change ytd -2.75% Spot change since 2005 revaluation 32.95%

*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 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET The offshore yuan market at a glance:

Instrument Current Difference from


Offshore spot yuan * 6.2175 0.12% Offshore non-deliverable 6.2325 -1.29% 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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KEY DATA POINTS - Yuan is positive outlier compared with plunging emerging market currencies GRAPHIC: http://link.reuters.com/cyx46v - Hot money tracker: Hot money inflows slowed to a trickle in December 2013 GRAPHIC: http://link.reuters.com/saz74t - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Corporate FX behavior reflects yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t


(Editing by Kim Coghill)