HONG KONG, June 10 (Reuters) - China's yuan held flat against the dollar on Wednesday, as markets marked time ahead of U.S. inflation data later in the day that could shape the Federal Reserve's rate trajectory.

The yuan CNY=CFXS last traded 0.03% weaker at 6.7755 to the dollar, with tensions in the Middle East also keeping traders on edge. Its offshore counterpart fetched 6.7773 yuan CNH=, up about 0.03%.

The U.S. military on Tuesday launched strikes against Iran after President Donald Trump said Tehran had shot down a U.S. Apache helicopter in the Strait of Hormuz, further straining prospects of a peace deal in the Middle East and boosting safe-haven demand.

Investors are also watching U.S. consumer price index data for May, due later Wednesday, a crucial gauge of whether the Fed may lean toward rate hikes later this year following last week's stronger-than-expected jobs data. USCPI=ECI

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, edged up 0.01% to 100.02.

"Markets are waiting for inflation data to provide clearer directional signals for both Fed policy and dollar moves, with no clear trend emerging for the pair," analysts at Nanhua Futures said in a note.

On the domestic data front, China's producer prices rose for a third straight month in May to the highest since July 2022, driven by rising commodity prices and improved demand. Consumer prices also stayed elevated.

That followed stellar export growth reported on Tuesday as the global AI boom drove a surge in shipments.

China's policy rates adjustments would have limited effect on imported inflation, said Zhaopeng Xing, senior China strategist at ANZ Research. The country's exports are now structurally anchored in high-end manufacturing, he added, with profitability largely insulated from exchange rate movements.

ANZ's house view has the yuan at 6.70 by the end of this year, he said.

Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 6.8130 per dollar, its strongest since February 10, 2023, and 381 pips weaker than a Reuters' estimate.

The spot yuan is allowed to trade 2% either side of the fixed midpoint each day. The central bank has been setting softer-than-expected midpoint fixings, a move that market participants widely interpreted as an attempt to keep the market stable.

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -5.16 pips vs. offshore -5.16

• Three-month SHIBOR SHIBOR= 1.4 % vs. 3-month CNH HIBOR 1.6 %

LEVELS AT 03:34 GMT GMT

INSTRUMENT	CURRENT vs USD	UP/DOWN(-) VS. PREVIOUS CLOSE %	% CHANGE YR-TO-DATE	DAY'S HIGH	DAY'S LOW
Spot yuan CNY=CFXS	6.7744	-0.04	3.24	6.773	6.7767
Offshore yuan spot CNH=D3	6.7763	0.05	2.97	6.7749	6.7782