SHANGHAI, July 8 (Reuters) - The yuan weakened on Thursday as the dollar traded near its highest levels in three months and after China"s cabinet floated the possibility of cuts to banks" reserve requirements to support economic growth. While the cabinet said China would keep monetary policy stable, investors took talk of cuts in RRR - the mandatory reserves that banks have to set aside - as a strong easing signal ahead of June economic data next week that is expected to show a further softening of momentum. The policy comments added to a bearish tone for the yuan. Chinese government bond futures soared and the benchmark Chinese 10-year yield fell to its lowest level since August.. "The PBOC"s dovish shift may hint (at) softening growth momentum for China economy in the rest of this year," Ken Cheung, chief Asian FX strategist at Mizuho Bank said in a note The yuan dipped around 0.1% against the dollar by midday, with the greenback supported by the Federal Reserve"s June policy meeting minutes which showed the Fed could begin to taper asset purchases as soon as this year. Various participants at the Fed meeting said they felt conditions for curbing bond-buying would be "met somewhat earlier than they had anticipated," though others saw a less clear signal from incoming data, the minutes showed. Before the market open, People"s Bank of China set the yuan"s daily midpoint rate at 6.4705 per dollar, firmer than the previous fix of 6.4762. Spot yuan opened at 6.4762 per dollar and was changing hands at 6.4783 at midday, 71 pips weaker than Wednesday"s late session close. The offshore yuan weakened to 6.4841 per dollar from a close of 6.4753, but the Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 98.24, unchanged on the day. Expectations of easing in China and tightening in the U.S. pushed spreads between the two countries" 10-year sovereign yields tighter on Thursday after they had widening to a four-month high earlier this week. The global dollar index rose to 92.752 from the previous close of 92.714. "In the near term we continue to expect the U.S. dollar to strengthen, but the yuan is still rangebound overall," said a trader at a foreign bank. The yuan market at 4:00AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4705 6.4762 0.09% Spot yuan 6.4783 6.4712 -0.11% Divergence from 0.12% midpoint* Spot change YTD 0.77% Spot change since 2005 27.76% revaluation Key indexes: Item Current Previous Change Thomson 98.24 98.24 0.0 Reuters/HKEX CNH index Dollar index 92.752 92.714 0.0 *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 6.4841 -0.09% * Offshore 6.6513 -2.72% 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 in Shanghai and Xiao Han in Beijing; Editing by Kim Coghill) Our Standards: The Thomson Reuters Trust Principles.