By Summer Zhen

HONG KONG, July 11 (Reuters) - China's yuan slightly

firmed against the dollar on Thursday, as the greenback

struggled for direction after the U.S. Federal Reserve indicated

it is getting closer to cutting interest rates.

Fed Chair Jerome Powell sent some dovish hints on rate

policy when making comments during testimony to Congress this

week, raising market hopes for a rate cut later this year.

By 0353 GMT, the yuan was 0.08% higher at 7.2705

to the dollar after trading in a range of 7.2689 to 7.2760.

Still, the currency hovered near an almost eight-month low

made on Wednesday after sluggish Chinese inflation data.

Weak inflation calls for larger-scale policy support to be

announced during the crucial third plenary session next week,

analysts with DBS said.

More support for economy and the ailing housing sector

should lift the yuan, they said.

Prior to the market opening, the People's Bank of China set

the midpoint rate, around which the yuan is allowed

to trade in a 2% band, at 7.1339 per dollar, 1,391 pips firmer

than a Reuters' estimate.

The central bank has been gradually lowering its daily yuan

official guidance, well within market projections, but with a

bias suggesting it is allowing some depreciation, traders and

analysts said.

The spot yuan opened at 7.2738 per dollar, and

was last trading 54 pips firmer than the overnight close and

1.91% weaker than the midpoint.

The yuan has weakened 2.3% so far this year. It has been

under pressure since early 2023 as domestic woes around a

moribund property sector, anaemic consumption and falling yields

drive capital flows out of yuan, and foreign investors stay away

from its struggling stock market.

On his second day of testimony on Wednesday, Powell said he

was not ready to conclude that inflation is moving sustainably

down to 2% though he has "some confidence of that."

Market focus now shifts to the June U.S. consumer price

index (CPI) to be announced on Thursday to get clearer clues on

rate cut roadmap.

Based on Thursday's official guidance, the yuan is allowed

to drop as far as 7.2766.

The offshore yuan traded at 7.2856 yuan per dollar,

up about 0.08% in Asian trade.

The dollar's six-currency index was 0.038% lower at

104.93.

Key onshore vs offshore levels:

Overnight dollar/yuan swap onshore -7.90 pips vs. offshore -7.90

Three-month SHIBOR 1.9 % vs. 3-month CNH HIBOR 3.2 %

LEVELS AT 0351 GMT

INSTR CURRE UP/DO % DAY'S DAY'S

UMENT NT vs WN(-) CHANG HIGH LOW

USD VS. E

PREVI YR-TO

OUS -DATE

CLOSE

%

Spot 7.270 0.08 -2.32 7.268 7.276

yuan 5 9