By Chen Yixin and Jacqueline Wong SHANGHAI, June 3 (Reuters)- The yuan rose slightly against the dollar on Friday after the People's Bank of China set a higher mid-point, underpinning expectations it will let the Chinese currency rise further to help curb inflation. Dealers said the yuan had potential to hit a new high after the Dragon Boat Festival next Monday, when Chinese financial markets will be closed. Market expectations are for the yuan to rise some 0.5 percent in June. Spot yuan was at 6.4806 versus the dollar by midday, stronger than Thursday's close of 6.4828. It has hit seven record highs in intraday trade since May 24. The Chinese currency has now appreciated 5.33 percent since it was depegged from the dollar in June 2010, and 1.66 percent since the start of this year. Before trade began, the PBOC set the yuan's daily mid-point at 6.4846 against the dollar, stronger than Thursday's 6.4886. The central bank uses the mid-point to guide the currency. "The weak dollar pushed up the yuan, but the range is small, showing that the central bank is only gradually guiding the currency up," said a dealer at a Chinese bank in Shanghai. "And we still expect the yuan will continue to rise in June." Dealers widely expect the government will still use the exchange rate to curb high inflation as further interest rate increases may be too harsh and could hurt the domestic economy. Fang Gang, a government economist, was quoted in the Securities Times that the Chinese yuan's steady appreciation could come to an end after two or three years, and the central bank is more likely to use quantitative measures rather than interest rates to check inflation. The yuan has risen 5 percent in the past year, and considering an annual inflation rate of 4 percent, he said real appreciation had reached 9 percent. [ID:nL3E7H3046] Offshore, one-year non-deliverable forwards (NDFs) were bid at 6.3630, up from Thursday's close of 6.3580. Their implied yuan appreciation in a year's time eased to 1.91 percent from 1.99 percent.

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