SHANGHAI, Nov 2 (Reuters) - The yuan extended gains on Monday, underpinned by China's manufacturing rebound from coronavirus disruptions while the market turned its focus to the U.S. presidential election. A private business survey on Monday showed that activity in China's factory sector accelerated at the fastest pace in nearly a decade in October as domestic demand surged. On Saturday, another gauge showed factory activity expanded at a slightly slower pace, but was above analysts' expectations, suggesting a continuing economic recovery for the world's second-largest economy from the pandemic. Improving economic performance and increasing capital inflows have pushed the yuan higher for five months through October. Many investors believe the Chinese currency could rise further against the backdrop of sound economic fundamentals. Prior to market opening, the People's Bank of China (PBOC) set the midpoint at a near one-week high of 6.705 per dollar, 182 pips or 0.27% firmer than the previous fix of 6.7232. The onshore yuan opened at 6.6940 per dollar and was changing hands at 6.6878 at midday, 54 pips firmer than the previous late session close. Traders said the second wave of coronavirus infections and fresh lockdown measures in Europe have soured risk sentiment in global markets, but the dollar was holding its recent gains on safety bids ahead of the U.S. presidential election. "For this week, the U.S. election is the top priority," said Li Liuyang, chief currency analyst at China Merchants Bank, expecting the yuan to trade in a range of 6.6 to 6.75 per dollar this week depending on the election result. Speculative bets that Joe Biden will win the White House on Nov. 3 and bring a steadier tone to rocky Sino-U.S. relations have turbocharged the strongest yuan rally in years. The central bank has, however, pushed back against the gains by cutting the cost of shorting the currency and tweaking how it sets its trading range to remove barriers to declines. The global dollar index rose to 94.138 at midday, when the offshore yuan traded at 6.6913 per dollar. The yuan market at 0417 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.705 6.7232 0.27% Spot yuan 6.6878 6.6932 0.08% Divergence from -0.26% midpoint* Spot change YTD 4.12% Spot change since 2005 23.76% revaluation Key indexes: Item Current Previous Change Thomson 95.51 95.24 0.3 Reuters/HKEX CNH index Dollar index 94.138 94.1 0.0 *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 6.6913 -0.05% * Offshore 6.8533 -2.16% 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; Editing by Jacqueline Wong)
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