SHANGHAI, Dec 2 (Reuters) - The yuan extended gains to a more than one-week high against the dollar on Wednesday, after the central bank set a much stronger official guidance rate, reflecting broad greenback weakness. The dollar stayed near a 2-1/2-year low as investors cautiously eyed developments in talks about further fiscal stimulus from the United States. Currency traders said the weakness in the greenback, along with market expectations for further monetary easing by the U.S. Federal Reserve and improving economic fundamentals in China could allow the Chinese unit to rise further. Declines in the dollar overnight prompted the People"s Bank of China (PBOC) to lift its midpoint rate by the most in nearly a month to 6.5611 per dollar, 310 pips, or 0.47%, firmer than the previous fix of 6.5921. Wednesday"s fixing was also the strongest since Nov. 19. The onshore yuan opened at 6.5609 per dollar and rose to a high of 6.5524 at one point in morning trade, the strongest level since Nov. 23. By midday, it was changing hands at 6.5533, 167 pips firmer than the previous late session close. Traders said the strength in the Chinese unit was reacting to the weaker dollar, but some investors became cautious as both onshore and offshore yuan were approaching their psychological resistance soon. "The immediate target remains at the recent low around 6.5300, with the risk-reward favouring a break-out lower (for USD/CNH)," Terence Wu, strategist at OCBC Bank said. The offshore yuan followed the strengthening trend to a high of 6.5425 per dollar on Wednesday morning, the loftiest level since Nov. 18. It traded at 6.5429 as of midday. Still, economists and analysts expect continued economic recovery from coronavirus disruption in China could extend the yuan"s recent rally. "On the fundamental side, China"s growth is likely to remain above-trend in the coming months," analysts at MUFG Bank said in a note, expecting the yuan to move in a range of 6.45 to 6.75 per dollar in December. Chinese currency started its appreciation trend in June and booked six straight months of gains, the longest such winning streak since late 2014. It has risen nearly 9% to the dollar since late May. The yuan market at 0400 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.5611 6.5921 0.47% Spot yuan 6.5533 6.57 0.25% Divergence from -0.12% midpoint* Spot change YTD 6.25% Spot change since 2005 26.30% revaluation Key indexes: Item Current Previous Change Thomson 95.51 95.68 -0.2 Reuters/HKEX CNH index Dollar index 91.137 91.188 -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 6.5429 0.16% * Offshore 6.7132 -2.27% 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 Sam