SHANGHAI, April 9 (Reuters) - The yuan gave up early gainsand weakened against the U.S. dollar on Monday after BloombergNews reported China is evaluating the potential impact of agradual yuan depreciation as a tool in the escalating tradedispute with the United States. The report, which cited unidentified sources familiar withthe matter, triggered a sudden sell-off in the Chinese currencyin afternoon trade.While both Washington and Beijing have ramped up tit-for-tattrade threats in recent weeks, traders had believed there was alow risk of China changing its currency policy in the near term,which could further roil global financial markets.Tommy Xie, an economist at OCBC Bank in Singapore, said yuandepreciation might be the most acceptable option available forthe Chinese authorities now as it could be "a bridging tactic"."If the market believes yuan depreciation is an option, theself induction process may lead to a weaker yuan, which (would)actually help China in negotiation process," Xie said."But the magnitude is tricky. China has spent almost $1trillion (of its reserves) in the past three years to containoutflow risk."In the spot market, the yuan opened at 6.3005 perdollar, eased to a low of 6.3566 per dollar at one point inafternoon trade -- the weakest intraday level since March 9.By the closing bell, the onshore spot yuan settled at 6.3107per dollar.If the yuan ends the late night session at its domesticclose, it would have lost 0.13 percent to the dollar for theday.The offshore yuan was also on the weakening trend,falling to a low of 6.3260. It was traded at 6.3110 as of 0830GMT.
(Reporting by Winni Zhou and David Stanway; Editing by KimCoghill)