THE yuan is expected to remain stable against the United States dollar over the next few months but will face increasing pressure to appreciate in the second half of next year, analysts said.

The Chinese currency was flat against the US dollar last week when it ended at 6.8276 on Friday, according to the China Foreign Exchange Trade System.

China International Capital Co said in a latest research report that the interest rate is very likely to remain unchanged in the first half of next year but the yuan will face increasing pressure to appreciate in the second half.

"China is likely to readjust its monetary policy with inflation risks rising, and the yuan may gain 3 percent against the dollar in 2010," the report said.

But there isn't much room for the yuan to appreciate, Zhou Xiaochuan, governor of the People's Bank of China, said ahead of a meeting of financial chiefs of the Group of 20 in Scotland over the weekend.

"The pressure from the international community on the yuan to appreciate is not that big," Zhou was quoted by Bloomberg News as saying.

Earlier last week, Guo Qingping, a PBOC assistant governor, stressed China will stick to the loose monetary policy stance and ensure enough liquidity in the banking system.