SHANGHAI, Dec 24 (Reuters) - China"s yuan firmed on Thursday as the central bank set a stronger midpoint guidance and the dollar weakened on hopes a long-elusive Brexit deal was imminent. Prior to market open, the People"s Bank of China set the midpoint rate at 6.5361 per dollar, 197 pips firmer than the previous fix of 6.5558. The spot market opened at 6.5350 per dollar and was changing hands at 6.5298 at midday, 102 pips firmer than the previous late session close. The dollar was on the back foot in holiday-thinned trading as hopes for a Brexit deal that would protect some $1 trillion in annual cross-channel trade from tariffs and quotas sapped demand for the safest assets. The potential deal pushed the dollar lower, supporting the yuan, and the Chinese currency could passively strengthen more if the weakness in the greenback persists, traders said. Investors cheered news that Britain and the European Union were on the cusp of striking a narrow trade deal on Thursday, which would help avoid shipping and travel chaos on both sides of the English Channel. "The yuan could test the 6.5 per dollar level in the last days ahead of the new year, though it also depends on how the dollar performs," said a trader at a Chinese bank. But according to Tianfeng Securities, the yuan rally would temporarily end when the population is widely vaccinated against the coronavirus which could help narrow the gap of the economic growth rates between China and overseas countries. China will lower import tariffs on more products in high domestic demand for next year, including medical equipment, raw materials for baby powders, high-tech equipment and some commodities, the finance ministry said on Wednesday. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, was at 95.35, weaker than the previous day"s 95.41. The global dollar index fell to 90.235 from the previous close of 90.302. The offshore yuan was trading at 6.5207 per dollar. 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 6.6773, 2.11% away from the midpoint. One-year NDFs are settled against the midpoint, not the spot rate. The yuan market at 4:26AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.5361 6.5558 0.30% Spot yuan 6.5298 6.54 0.16% Divergence from midpoint* -0.10% Spot change YTD 6.64% Spot change since 2005 revaluation 26.75% Key indexes: Item Current Previous Change Thomson Reuters/HKEX CNH index 95.35 95.41 -0.1 Dollar index 90.235 90.302 -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 * 6.5207 0.14% Offshore non-deliverable forwards ** 6.6773 -2.11% *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 Luoyan Liu, Jindong Zhang and Brenda Goh; Editing by Himani Sarkar)