SHANGHAI, May 13 (Reuters) - China's yuan eased further, touching a more than 19-month low against the dollar on Friday and breaching a key threshold, and looked set for the sixth straight weekly losses.

The Chinese currency has lost more than 6% against a strengthening dollar over the past four weeks, a sudden, deep plunge for the yuan, which has long been tightly managed and usually moves within thin ranges.

"We feel the Chinese authorities are comfortable in letting the CNY weakening further, so long as the depreciation remains orderly," said Becky Liu, head of China macro strategy at Standard Chartered. "FX policy appears to be one of the options to alleviate growth pressure, via alleviating exports pressure."

Liu noted that China is facing increasingly downward growth pressure, and sees little room to alter its zero-COVID policy, while domestic monetary policy easing is constrained by a hawkish Federal Reserve.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at a fresh low of 6.7898 per dollar, 606 pips or 0.9% weaker than the previous fix, 6.7292, but 57 pips firmer than Reuters' estimate of 6.7955.

In the spot market, the onshore yuan CNY=CFXS opened at 6.7900 per dollar, and quickly weakened past 6.8 to a low of 6.8150, the softest level since Sept. 30, 2020.

By midday, it was changing hands at 6.7925, 53 pips weaker than the previous late-session close.

Currency traders said absence of discomfort among the authorities over the recent yuan weakness, other than firmer-than-expected midpoint settings, have encouraged some investors to test new lows in the currency.

"While likely related to portfolio outflows, the move is getting compounded by the PBOC's hands-off stance, which is adding to the local USD buying frenzy," said Stephen Innes, managing partner at SPI Asset Management.

The rapid losses in the yuan also dragged down its value against major trading partner, with the CFETS yuan basket index .CFSCNYI falling to 100.8, the lowest level since November 2021, and down 1.63% this year, according to Reuters calculations based on official data.

Xing Zhaopeng, senior China strategist at ANZ, said the authorities might want to nudge the yuan's basket index to a more comfortable level, in a bid to protect China's export competitiveness.

"My feeling is that the goal is to cap the basket index below 98," Xing said, noting the index had usually hovered in a range of 92 to 98 in the last few years.

By midday, the global dollar index .DXY fell to 104.64 from the previous close of 104.851, while the offshore yuan CNH=D3 was trading at 6.8108 per dollar.

The yuan market at 0330 GMT:

ONSHORE SPOT: Item

Current Previous Change PBOC midpoint

6.7898 6.7292

-0.89% CNY=SAEC

Spot yuan

6.7925 6.7872

-0.08% CNY=CFXS

Divergence from

0.04%

midpoint*

Spot change YTD

-6.44% Spot change since 2005

21.85% revaluation

Key indexes:

Item

Current

Previous Change

Thomson

100.39

100.32

0.1 Reuters/HKEX

CNH index

Dollar index

104.64

104.851 -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 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET Instrument

Current Difference

from onshore Offshore spot yuan

6.8108

-0.27% CNH= *

Offshore

6.839

-0.72% non-deliverable

forwards

CNY1YNDFOR= **

*Premium for offshore spot over onshore CNY=CFXS **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC .

Reporting by Winni Zhou and Andrew Galbraith