SHANGHAI, Sept 22 (Reuters) - The yuan edged higher on Tuesday, despite a weaker-than-expected official midpoint rate and the U.S. dollar's rebound in global markets, as some investors were encouraged by recent economic data showing China recovering from its virus-induced slump. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7872 per dollar, 277 pips or 0.41% weaker than the previous fix of 6.7595. But the official guidance came in weaker than market expectations, according to several traders and analysts. "As the RMB sentiment has been turning bullish over past few months, the PBOC might start to withdraw the counter-cyclical factor to allow more two-way FX volatility to keep the RMB stable at its equilibrium level in the medium term," said Ken Cheung, chief Asian FX strategist at Mizuho Bank. In the spot market, onshore yuan opened at 6.7960 per dollar and was changing hands at 6.7860 at midday, 184 pips firmer than the previous late session close. "Our long RMB view remains in place, and we take heart from the USD/CNH finding little traction above 6.8000," Terence Wu, strategist at OCBC Bank, said in a note. "Nevertheless, 6.7400/500 may now be a temporary floor before the October Golden Week. Beyond that, we continue to look for 6.7100 as a multi-week target." Several onshore currency traders said the dollar's bounce in global markets overnight put some pressure on the yuan, but the currency remained underpinned by China's better-than-expected economic recovery. In remarks at the weekend, President Xi Jinping said despite rising external risks, the economy was resilient and Beijing had ample policy tools. "Sound economic fundamentals continued to support the yuan," said a trader at a Chinese bank, expecting the yuan to trade in a range of 6.75 to 6.8 per dollar in the near term. Some market participants said the upcoming review by the global index provider FTSE Russell to include Chinese government bonds in its World Government Bond Index (WGBI) later this week would affect sentiment toward the yuan. Meantime, a resurgent dollar held on to overnight gains against other major currencies. The global dollar index traded at 93.526 at midday, when the offshore yuan was changing hands at 6.788 per dollar. The yuan market at 0400 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.7872 6.7595 -0.41% Spot yuan 6.786 6.8044 0.27% Divergence from -0.02% midpoint* Spot change YTD 2.61% Spot change since 2005 21.96% revaluation Key indexes: Item Current Previous Change Thomson 93.85 93.78 0.1 Reuters/HKEX CNH index Dollar index 93.526 93.574 -0.1 *Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.788 -0.03% * Offshore 6.946 -2.29% non-deliverable forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Winni Zhou and Andrew Galbraith)
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