* C.bank uses midpoint guidance to cap yuan's gains

* Yuan supported on improving trade balance

* Yuan unlikely to resume non-stop appreciation in future

* Yuan seen moving narrowly around 6.15/dollar before mid-Sept

SHANGHAI, Aug 29 (Reuters) - The yuan edged higher versus the dollar on Friday and is set to rise nearly 1 percent in August in the third straight month of gains, with China's improving exports helping boost market sentiment towards the Chinese currency, traders said.

To curb the yuan's growing momentum the People's Bank of China has fixed a slew of weak midpoints - signalling the government's intention to hold the yuan steady as economic growth appears to be faltering again. ID:nL3N0QW35G

"The market expects China to post another strong trade surplus for August, and that confidence has kept the yuan appreciating," said Huang Yi, head of foreign exchange trading at Guangfa Bank in Shanghai.

"However, as China's economy will probably not return to its 10 percent-plus annual growth seen in the last decade, the yuan will also not stage another round of non-stop appreciation seen from 2005 to 2010."

Spot yuan CNY=CFXS stood at 6.1436 per dollar at midday, up slightly from Thursday's close, after the PBOC fixed its midpoint at 6.1647, marginally weaker than Thursday's 6.1638.

Traders said they believed the yuan is likely to move in narrow ranges around 6.15 per dollar until mid-September when China is due to post a batch of economic data for August.

The onshore spot yuan market at a glance: Item Current Previous Change (pct) PBOC midpoint CNY=SAEC 6.1647 6.1638 -0.01 Spot yuan CNY=CFXS 6.1436 6.1446 0.02 Divergence from midpoint* 0.34 (pct) Spot change ytd -1.46 Spot change since 2005 34.72 revaluation

*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.

The offshore yuan market at a glance: Instrument Current Difference

from onshore

(pct) Offshore spot yuan CNH=D3 6.2266 0.00 Offshore non-deliverable 6.2215 -1.28 forwards CNY1YNDFOR= *Premium for offshore spot over onshore CNY=CFXS **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC .

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RECENT DEVELOPMENTS

- China move to guide yuan higher puts FX market in spin ID:nL4N0OX05J

- US warns China over currency depreciation ID:nL2N0MZ1L1

- Capital flows, improving trade to prop up yuan in H2 ID:LnL4N0MM0K9

- Dim sum bonds mark record quarter in Hong Kong ID:nL4N0MT1ZH

- New quotas rekindle debate over dim sum market's future ID:nL3N0KQ1GB

- Flood of offshore yuan bonds may spark higher yields ID:nL3N0KX1IA

KEY DATA POINTS

- Yuan spot performance versus midpoint after trading band widened http://link.reuters.com/jyz38v

- China's yuan, other emerging mkt currencies vs dollar http://link.reuters.com/xyd46v

- Global currency performance INTERACTIVE GRAPHIC: http://link.reuters.com/cyx46v

- China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s

- Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t

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(Reporting by Lu Jianxin and Kazunori Takada; Editing by Eric Meijer) ((jianxin.lu@thomsonreuters.com)(86 21 6104 1792)(Reuters Messaging: jianxin.lu.thomsonreuters.com@reuters.net))

Keywords: MARKETS CHINA YUAN MIDDAY/