Australia shares up as investors breathe sigh of relief over yuan

* Gains led by banks

* Energy sector down

* Market set for weekly loss (Adds analysis, quotes, stocks on the move)

By Charlotte Greenfield and Gyles Beckford

SYDNEY/WELLINGTON, Aug 14 (Reuters) - Australian shares rose 0.12 percent on Friday as the market continued to stabilise after the shock devaluation of the yuan, but the benchmark was still on track for a weekly loss.

The S&P/ASX 200 index edged up 6.732 points to 5394.600 by 0135 GMT and was headed for weekly losses of 1.3 percent. The benchmark inched up 0.1 percent on Thursday.

Support came from the People's Bank of China (HKSE: 3988-OL.HK - news) (PBOC) reassuring investors on Thursday by saying there was no reason for the yuan to fall further given the country's strong economic fundamentals.

The PBOC had previously shocked markets around the world by setting its yuan exchange rate nearly 2 percent lower on Tuesday.

China is Australia's largest trading partner, making its economy particularly sensitive to news from China.

"Today we're seeing Renminbi (yuan) appreciation. It's marginally appreciating, but it's not depreciating, so that's given some confidence to our market," said Damien Boey, equity strategist at Credit Suisse (Other OTC: CDSSF - news) .

The PBOC set the midpoint rate for the Chinese Yuan Renminbi at 6.3975 per dollar prior to market open, firmer than the previous day's close of 6.399.

The financial sector led stock market gains with Westpac up 0.57 percent and NAB up 0.63 percent, while ANZ was flat.

The energy sector suffered as global oil prices remained under pressure. Oil Search (Dusseldorf: OIS.DU - news) dropped 4.2 percent while Origin Energy was down 2.6 percent.

Cogstate Ltd, a cognitive test developer, rose as much as 11.6 percent after announcing the company had been selected to provide services in two clinical trials.

Shares (Berlin: DI6.BE - news) in agribusiness company Elders Ltd (Other OTC: EDRSF - news) rose as much as 7.96 percent after it said it would acquire up to $30 million of Elders hybrids.

News Corp (Other OTC: NWSAL - news) was up as much as 3.9 percent after the media company announced strong Q4 results.

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New Zealand stocks rose for the first time in seven sessions with the benchmark NZX50 share index up 0.3 percent to 5,752.83, as it climbed away from a one-month low touched the previous day.

Investors hand-picked stocks that had been battered over the past week for example Fletcher Building (NZSE: FBU.NZ - news) which was up 1.2 percent - recovering from the 2 1/2-year low touched on Thursday.

Casino company Sky City Entertainment (NZSE: SKC.NZ - news) , which reported an improved annual result earlier this week, while Fisher & Paykel Healthcare was also firmer.

Chemical and resins manufacturer Nuplex was up 1.7 percent after reporting a solid lift in its full year profit, raising its dividend, and stating it expected to see modest growth in the coming year.

Next (Other OTC: NXGPF - news) week sees a run of company earnings, including reports from most of the leading stocks.

(Reporting by Charlottle Greenfield; Editing by Eric Meijer)