SHANGHAI, Dec 7 (Reuters) - China"s yuan inched lower on Monday as rising U.S.-China tensions weighed on the currency and pulled it back from a two-and-a-half-year high hit last week. The United States is preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing"s disqualification of elected opposition legislators in Hong Kong, sources told Reuters. The yuan took a breather after hitting its highest since June 2018 on Friday, but traders and analysts expected the currency"s rally to continue along with China"s economic rebound. In the latest sign of a steady economic recovery from COVID-19, Chinese exports rose at the fastest pace since February 2018 in November as a recovery in factory activity outpaced those of major trading partners. Before the market open, the People"s Bank of China (PBOC) set midpoint rate of the yuan"s daily trading band at 6.5362 per dollar, its firmest level since June 26, 2018. Spot yuan opened at 6.5330 per dollar and softened to 6.5344 by midday, 44 pips weaker than Friday"s late session close. Offshore yuan was flat from the previous day"s close at 6.517 per dollar. "China trade data... shows a still very significant improvement in exports, so I think at this stage renminbi strength may not be very much a PBOC concern," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong. He said yuan strength had been primarily driven by a decline in the U.S. dollar, and that the PBOC was more likely to be on guard against indications of "herd behaviour", or strong one-sided expectations of yuan appreciation. Chinese policymakers are comfortable with the yuan"s recent rise as the economic recovery accelerates and the central bank gives the market greater leeway in setting the currency"s value, sources told Reuters last week. A trader at a foreign bank said the U.S. dollar had once again entered a period of weakness, with the dollar index"s support at 90 unlikely to hold. The global dollar index fell to 90.715 on Monday from the previous close of 90.83. "The yuan is still appreciating overall, but is moving relatively little against the dollar. With the U.S. dollar so weak the yuan is likely to be biased toward further strength," the trader said. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan"s value, traded at 6.6891. The yuan market at 4:20AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.5362 6.5507 0.22% Spot yuan 6.5344 6.53 -0.07% Divergence from -0.03% midpoint* Spot change YTD 6.56% Spot change since 2005 26.66% revaluation Key indexes: Item Current Previous Change Thomson 95.42 95.36 0.1 Reuters/HKEX CNH index Dollar index 90.735 90.83 -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 6.517 0.27% * Offshore 6.6891 -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 Andrew Galbraith and Jindong Zhang; Editing by Ana Nicolaci da Costa)