Jan. 12 (Bloomberg) -- China will keep the yuan trading within a narrow range against the dollar in 2009 on concern renewed appreciation will hurt exporters at a time of shrinking global demand, Goldman Sachs Group Inc. said.

The yuan has been little changed since the end of July as the People’s Bank of China pledged to pursue a stable currency while a credit crisis triggered recessions in the U.S., Europe and Japan. China’s exports fell 5.3 percent in December, the most in almost a decade, according to a Bloomberg News survey of economists before a government report due as early as today.

The central bank “will likely keep the yuan close to a peg against the dollar,” Helen Qiao and Song Yu, Hong Kong-based economists at Goldman, wrote in a report today. “This is viewed as a critical issue for trade development in the face of unprecedented uncertainties in the global economy.”

The yuan’s 21 percent gain since the end of a fixed exchange rate in July 2005 has squeezed exporters’ profits and made Chinese products more expensive for overseas buyers. The slide in exports is undermining Premier Wen Jiabao’s target of sustaining economic growth at more than 8 percent a year.

Goldman’s analysts predict the yuan will trade at about 6.87 per dollar in three, six and 12 months. The yuan traded at 6.8380 a dollar as of 12:33 p.m. in Shanghai, from 6.8356 on Jan. 9, according to the China Foreign Exchange Trade System.

Bank of China

China’s yuan will remain stable this year and rise from 2010, driven by a weaker dollar policy that the U.S. will need to revive its economy, Bank of China Ltd., the nation’s largest currency trader, wrote in separate research today.

“An appreciation of the yuan versus the dollar will unfold in 2010, driven by an overall weakening of the dollar,” Shi Lei, a currency analyst in Beijing, wrote in a report.

The dollar will turn weaker from the second half of this year as the U.S. government may have to rely on printing money to finance economic stimulus, Shi wrote. Federal Reserve injections of cash into finance companies will also “put pressure on the dollar to weaken,” he wrote.

The Chinese currency plunged 0.7 percent in the first week of last month prompting concern that the central bank will resort to devaluation to boost overseas sales. Vietnam’s central bank on Dec. 25 weakened the dong 3 percent.

China probably won’t allow the yuan to devalue due to “fear of triggering a competition of exchange-rate depreciations in other developing countries as well as the revival of protectionism in industrialized countries,” Goldman wrote.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net

Last Updated: January 11, 2009 23:46 EST