China's yuan wobbled slightly but remained broadly steady against dollar on Wednesday, after a firmer midpoint fixing and benchmark rates being kept unchanged. Traders are also keeping a close eye on policy decisions from the U.S. Federal Reserve, which is widely expected to hold rates steady although policymakers are also likely to take a stern view on inflationary threat from higher oil prices.

The spot yuan was changing hands at 7.2975 around midday, having touched 7.2995, the weakest level since September 11, although it still remains near previous day's close. Prior to market open, the People's Bank of China (PBOC) set the midpoint rate at 7.1732, the strongest in five weeks. The yuan has steadied against the dollar in recent weeks amid signs of stabilisation in the stuttering economy, and following a slew of central bank measures to support the currency which has slumped roughly 5.5% so far this year.

Maybank said in a note on Wednesday that any signs of stabilization in credit and consumption data would anchor the yuan but that it's still premature to expect a recovery in the fourth quarter. "The bottoming out process would likely be long and bumpy," the bank said. The yuan's weakness has made Beijing more cautious in easing monetary policy further. On Wednesday, China kept benchmark lending rates unchanged at a monthly fixing, in line with expectations. China will resolutely curb disruptions to the market order, and guard against the risk of exchange rate overshooting, Zou Lan, head of the monetary policy department at the PBOC, told a conference on Wednesday.

However, Zhou said that more attention should be given to the yuan's value against a basket of currencies. "People usually discuss more about the exchange rate of the yuan against the dollar, but in fact, the exchange rate of the yuan against a basket of currencies can more comprehensively reflect the changes in the value of the currency." China's CFETS RMB Index has climbed to 98.51, the highest level since late May. The yuan market at 4:35AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 0.00% 7.1732 7.1733 Spot yuan 7.297 -0.02% 7.2982 Divergence from midpoint* 1.74% Spot change YTD -5.46% Spot change since 2005 revaluation 13.40% *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% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan * 7.31 -0.16% Offshore non-deliverable 0.58% forwards 7.1315 ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Shanghai newsroom Editing by Shri Navaratnam)