UPDATE 1-China FX reserves fall in February, first drop in 13 months

* China's FX reserves fall $27 bln in February

* Economists polled by Reuters expected reserves to drop by $1 bln

* Regulator says decline due to global currency rate fluctuations

* Rising U.S. rates could pressure yuan, revive outflow worries

BEIJING, March 7 (Reuters) - China's foreign exchange reserves fell in February, posting their first decline in 13 months, as the yuan weakened against the U.S. dollar amid wild swings in global financial markets. Reserves fell $27 billion to $3.134 trillion, compared with an increase of $21.5 billion in January, central bank data showed on Wednesday. Economists polled by Reuters had expected reserves to drop The State Administration of Foreign Exchange (SAFE) said adjustments in the value of China's holdings of non-dollar currencies and assets led to the decline for the month, adding that the size of its foreign exchange reserves will remain basically stable. "Our model suggests that the PBOC largely remained on the sidelines, with most of the decrease in the value of reserves due to exchange rate movements," Capital Economics' Senior China Economist Julian Evans-Pritchard wrote in a note, referring to whether the central bank intervened in markets last month. Capital flight was seen as a major risk for China at the start of 2017, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, restoring confidence in the economy. China's reserves rose for the first time last year since 2014. They had slumped nearly $1 trillion to $2.998 trillion by January 2017 as authorities sought to shore up the yuan and reduce potentially destabilizing capital outflows. Last year was a turning point as China's cross-border capital flows went from net outflows to stable, SAFE spokeswoman Wang Chunying told reporters in January. The yuan rose around 6.8 percent against the greenback in 2017, reversing three straight years of depreciation. The gains stretched into this year, with January's 3.5 percent rise the yuan's best monthly performance since 1994. But the currency weakened 0.6 percent to the dollar in February in its first monthly drop since September. February's dollar gains were triggered by views that the U.S. central bank could raise interest rates at a faster pace, but the greenback has wilted again this month as President Donald Trump's plans to impose tariffs on imported steel and aluminum spark fears of a global trade war. "If concerns about U.S. protectionism continue to build, it will weaken global investors' appetite for emerging market assets," said Evans-Pritchard, who also argued that slower growth in China will likely trigger unexpected Chinese rate cuts this year. "In both cases, capital outflows from China will likely pick up. If the PBOC does not intervene, it would spark speculation China wants the yuan to weaken, which would revive outflows and depreciation pressure." The U.S. Federal Reserve is widely expected to raise rates again on March 21, a day after China's annual parliament meeting is slated to end. In response, most market watchers believe the PBOC will make small adjustments to the rates it charges for short- and medium-term OMO loans, including 7-day reverse repurchase agreements. The value of China's gold reserves fell to $78.064 billion at the end of February, from $79.675 billion at end-January.

(Reporting by Yawen Chen and Kevin Yao; Additional Reporting by Fang Cheng; Editing by Kim Coghill)