(Adds analyst comments, details and table)

SHANGHAI, Jan 6 (Reuters) - China's yuan hit a fresh 16-month low against the dollar on Monday, weighed by trade concerns and falling yields and defying the central bank's persistently stronger guidance and assurances that it will keep the currency stable.

The yuan breached the key threshold of 7.3 per dollar for the first time since 2023 on Friday, dragged lower by a broadly stronger greenback, falling Chinese yields and rising global trade tensions.

"We expect USD/CNY to continue to grind higher in the weeks ahead, and for the bulk of yuan depreciation to occur once the contours of President-elect Trump's trade policies are visible," analysts at Barclays said in a note.

"We maintain our end-2025 forecast of 7.50 but do not rule out much sharper yuan depreciation if President-elect (Donald) Trump once in office implements 60% trade tariffs on China as previously threatened."

On Monday, the onshore yuan fell to a trough of 7.3286 per dollar, the softest since September 2023. It last traded at 7.3282 around midday.

Its offshore counterpart followed the weakening trend to hit a low of 7.3640 per dollar before trading at 7.3564 around midday.

Major Chinese state-owned banks were seen selling dollars in the onshore spot market in an attempt to slow the pace of yuan declines, but it was unable to offset huge amounts of corporate dollar buying, currency traders said.

Prior to market opening, the People's Bank of China $(PBOC)$ set the midpoint rate , around which the yuan is allowed to trade in a 2% band, at 7.1876 per dollar, 2 pips firmer than the previous fix and 1,159 pips firmer than Reuters' estimate of 7.3035.

Based on Monday's official guidance, the yuan is allowed to drop as far as 7.3314.

The PBOC's midpoint rate has stayed on the firmer side of the key 7.2 level and stronger than market projections since mid-November, which traders and analysts widely interpret as a sign of rising unease over recent yuan declines.

Tight liquidity in Hong Kong lent some support for the yuan, with CNH Hong Kong Interbank Offered Rate benchmark (CNH HIBOR) rising across tenors.

The overnight CNH HIBOR rose to 5.91894%, the highest since November. Rises in the CNH HIBOR suggest the cost of shorting the Chinese currency has become more expensive.

Separately, China's central bank is expected to ramp up offshore yuan bill sales in Hong Kong in January, with the scale far exceeding previous issuance, state-owned news outlet Yicai reported on Monday, citing sources close to the central bank.

Financial News, a central bank publication, also reiterated on Monday that the PBOC has the tools and experience to respond to the yuan's depreciation.

On Friday, the PBOC said it would keep the yuan exchange rate basically stable while lowering banks' reserve requirement ratios and interest rates at "an appropriate time".

"In our view, these indicate the PBOC would like to manage the pace of yuan depreciation against the dollar and avoid sharp depreciation before the U.S. tariff announcement," economists at Goldman Sachs said in a note.

They added that sharp moves in the yuan during the 2018-19 U.S.-China trade war mainly occurred after the formal announcement of tariffs and expected a similar pattern in the PBOC's FX management this year.

Trump has pledged to impose tariffs across the board after he takes office on Jan. 20.

Key onshore vs offshore levels:

* Overnight dollar/yuan swap onshore -4.10 pips vs. offshore -4.10

* Three-month SHIBOR 1.7 % vs. 3-month CNH HIBOR 3.5 % LEVELS AT 0337 GMT:

INSTRUMENT CURRENT UP/DOWN(-) % CHANGE DAY'S HIGH DAY'S

vs USD VS. PREVIOUS YR-TO-DATE LOW

CLOSE %

Spot yuan 7.3282 -0.09 -0.39 7.3155 7.3286

Offshore 7.3564 0.05 -0.27 7.3466 7.364

yuan spot

(Reporting by Shanghai Newsroom; Editing by Kim Coghill and Sam Holmes)