By Jason Subler and Jianxin Lu
SHANGHAI, March 23 (Reuters) - The yuan closed down slightly against the dollar on Wednesday as market expectations of further appreciation of the currency offset a weaker mid-point set by the People's Bank of China.
In a sign of growing optimism that the government may let the yuan rise further this year, Yang Jianlong, an economist at the cabinet's Development Research Centre of the State Council, forecast on Wednesday that the yuan could rise at least 5 percent in the year.
"A 5-percent rise will be the bottom line for yuan appreciation this year, while the upward limit will be higher," Yang told a forum in Beijing.
Lian Ping, the chief economist at Bank of Communications, said in an article published by the official China Securities Journal that now is a good time for China to let the yuan rise faster because China's economy is expanding steadily while the global economy still faces difficulties.
Some dealers said the weak dollar in global markets would also pave the way for the PBOC to let the yuan rise gradually. The dollar index is now hovering around a 16-month low.
"The market remains confident that the yuan will appreciate solidly this year," said a dealer at a major Chinese commercial bank in Shanghai.
"That confidence makes investors unwilling to bet on a sharp pullback of the yuan even though the PBOC used its fixing today to signal that the appreciation will only be gradual."
The yuan closed at 6.5593 versus the dollar, down slightly from 6.5561 at the close on Tuesday, when it hit an all-time intraday high of 6.5552.
The currency has now risen 4.06 percent since it was depegged in June 2010, and 0.46 percent so far this year.
Before trading began, the PBOC fixed the yuan's mid-point at 6.5601, slightly weaker than Tuesday's record high fixing of 6.5592.
The central bank has all along used a tactic of taking two steps forward, one step back for yuan appreciation, partly to frustrate speculators. It uses the fixing, from which the dollar/yuan exchange rate may rise or fall 0.5 percent each day, to express its intentions on the direction for the currency.
Benchmark one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.4410 late on Wednesday, up from 6.4300 at Tuesday's close. Their implied yuan appreciation in a year's time fell to 1.84 percent from 2.02 percent. (Editing by Ken Wills)