SHANGHAISINGAPORE, Aug 21 Reuters China cut its oneyear benchmark lending rate on Monday as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the fiveyear rate unchanged amid broader concerns about a rapidly weakening currency.

The recovery in the world39;s secondlargest economy has lost steam due to a worsening property slump, weak consumer spending and tumbling credit growth, adding to the case for authorities to release more policy stimulus.

However, downward pressure on the yuan means Beijing has limited room for deeper monetary easing, analysts say, as a further widening of China39;s yield differentials with other major economies could trigger yuan selloffs and capital flight.

The oneyear loan prime rate LPR was lowered by 10 basis points to 3.45 from 3.55 previously, while the fiveyear LPR was left at 4.20.

In a Reuters poll of 35 market watchers, all participants predicted cuts to both rates. The 10 bp cut in the oneyear rate was smaller than the 15 bp cut expected by most poll respondents.

Probably China limited the size and scope of rate cuts because they are concerned about downward pressure on the yuan, said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management.

Chinese authorities care about currency market stability.

Most new and outstanding loans in China are based on the oneyear LPR, while the fiveyear rate influences the pricing of mortgages. China cut both LPRs in June to…