SHANGHAI, Jan 4 (Reuters) - The yuan leapt nearly 1% against the dollar on the first trading day of the year on Monday, its biggest daily gain in about three months and breaching a key technical barrier that analysts say could extend last year"s strong gains. The onshore yuan strengthened 6.7% in 2020, booking its first annual rise in three years, as a weaker U.S. dollar, a widening yield gap between China and the United States and effective coronavirus containment in the world"s second-largest economy supported the Chinese unit. Prior to market opening, the People"s Bank of China (PBOC) set the midpoint rate at 6.5408 per dollar, 159 pips or 0.24% weaker than the previous fix of 6.5249. In the spot market, the onshore yuan opened at 6.5195 per dollar and jumped to a high of 6.4670 at one point, its strongest level since June 20, 2018. By midday, the yuan was at 6.4702, 581 pips firmer than the previous late session close on Dec. 31 and marching towards its best day since Oct. 9, 2020. The currency also appears to have overcome immediate concerns about official efforts to curb any rally past key thresholds. A trader at a Chinese bank said the yuan faced some resistance at 6.52 per dollar late last year, but once that was cleared, dollar selling accelerated. "The USD/CNH breached the 6.5000 support early this morning, with onshore USD/CNY also catching up on the decline," Terence Wu, strategist at OCBC Bank in Singapore, said in a note. "On a more structural basis, a further tilt towards 6.3000 cannot be ruled out if the current trends persist." Last week, China"s major state-owned banks were seen buying dollars at the rate of about 6.52 yuan, considered an effort to keep the local currency from rising too fast. Some traders expect increased corporate dollar selling to kick in during the run up to the Lunar New Year when companies usually need more local currency to make various payments, which should drive the yuan higher. Separately, upbeat manufacturing indicators have also lent support for the yuan. "China will maintain its pro-growth stance at least until the April politburo meeting that aims to discuss the current economic situation while deploying near-term economic work," Gao Qi, strategist at Scotiabank in Singapore, said in a note. In addition, China"s decision to cut the weighting of the U.S. dollar in the CFETS index basket could push the yuan"s value higher against its peers this year, some analysts said. The global dollar index fell to 89.693 at midday, when the offshore yuan was trading at 6.4518 per dollar. The yuan market at 0402 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.5408 6.5249 -0.24% Spot yuan 6.4702 6.5283 0.90% Divergence from -1.08% midpoint* Spot change YTD 7.62% Spot change since 2005 27.92% revaluation Key indexes: Item Current Previous Change Thomson 95.48 95.08 0.4 Reuters/HKEX CNH index Dollar index 89.693 89.759 -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 6.4518 0.29% * Offshore 6.6036 -0.95% 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 Holmes)