SHANGHAI, Dec 18 (Reuters) - China"s yuan slipped on Friday on year-end demand for dollars, but remained on track to finish the week higher as the dollar languished near two-and-a-half year lows against major peers. The Chinese currency has been stuck in a narrow range against the dollar since early December following a sharp 10% run-up from lows in late May. In recent days, the People"s Bank of China (PBOC) has moved to slow the pace of the yuan"s rally in the face of a weaker dollar, lowering a parameter on cross-border financing. That was followed by a large injection of medium-term cash into the banking system that helped to hose down some expectations of tighter policy. "The dollar index has been very weak recently, but the yuan has been very stable. We don"t expect significant moves before the year end, and regulators also don"t want the speed of appreciation to be too fast," said a trader at a Chinese bank. The PBOC set the midpoint rate of the yuan"s daily trading band at at 6.5315 per dollar prior to market open, stronger than Thursday"s fix of 6.5362. Supported by the slightly firmer fixing, spot yuan opened stronger at 6.5316 per dollar before weakening to 6.5403 by midday, 53 pips softer than Thursday"s late session close. It is up about 0.1% for the week. The offshore yuan also lost ground against the dollar and was trading at 6.5202 per dollar by midday. "Some dollar demand when approaching the year end provides support to the dollar/yuan," said Qi Gao, Asia FX strategist at Scotiabank in Singapore. "However, after consolidating around 6.50, the pair will finally breach the support and then slide towards 6.40." Gao said the expected strengthening of the yuan would follow from "broad dollar weakness and the yuan"s yield and growth advantage" over the dollar. "We remain bearish on the (dollar) index and expect it to trade even lower after breaking below the psychological 90 level on Thursday," said Gao. At midday on Friday, the global dollar index was at 89.985, up from 89.84 on Thursday. The yuan market at 4:01AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.5315 6.5362 0.07% Spot yuan 6.5403 6.535 -0.08% Divergence from 0.13% midpoint* Spot change YTD 6.47% Spot change since 2005 26.55% revaluation Key indexes: Item Current Previous Change Thomson 95.02 95.09 -0.1 Reuters/HKEX CNH index Dollar index 89.985 89.84 0.2 *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 6.5202 0.31% * Offshore 6.6737 -2.13% non-deliverable forwards ** *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 Andrew Galbraith; Additional reporting by Xiao Han in Beijing; Editing by Sam Holmes)