SHANGHAI, Jan 19 (Reuters) - China"s yuan firmed from two-week lows on Tuesday, edging higher on a weaker dollar as global investors await clarity on the policies of the incoming administration of U.S. President-elect Joe Biden. The U.S. dollar index was off a one-month high at 90.668 ahead of the Senate testimony on Tuesday of U.S. Treasury Secretary nominee Janet Yellen. Yellen will say that the United States does not seek a weaker dollar, the Wall Street Journal reported, although analysts expect U.S. central bank policy to nonetheless drag on the dollar. On Tuesday, the People"s Bank of China (PBOC) set the midpoint of the yuan"s daily trading band at 6.4883 per dollar prior to market open, its weakest level since Jan. 4, after the yuan finished its previous onshore session at two-week lows. Spot yuan opened at 6.4899 per dollar and firmed to 6.4868 by midday, 53 pips stronger than Monday"s late session close. The offshore yuan firmed to 6.4925 per dollar, from a close of 6.4960. In addition to the weaker dollar, traders said tight market liquidity had also helped to push the onshore currency higher, though they expect the PBOC to conduct liquidity injections to stabilise sentiment ahead of next month"s Lunar New Year holiday. The central bank injected a net 75 billion yuan ($11.6 billion) into the banking system on Tuesday, its largest such injection this year, after interbank borrowing rates spiked on Monday. On Tuesday, the overnight tenor of the Shanghai Interbank Offered Rate (SHIBOR) rose to 2.236%, its highest since Nov. 16. "In the near term, the yuan will continue to follow fluctuations in the dollar. Signs of an independent trend are still not clear," said a trader at a Chinese bank. But the yuan is widely expected to rise in 2021 after the country posted firm fourth-quarter growth figures on Monday, giving authorities more leeway to pursue policy tightening. Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong, said he expected authorities to continue to focus on financial deleveraging in 2021, leading to wider nominal spreads between Chinese and U.S. debt. "(Deleveraging) is supportive of a gradual yuan appreciation trajectory, as that positive differential with the U.S. continues to attract inflows into Chinese asset classes," he 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 6.6285 on Tuesday. The yuan market at 4:21AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4883 6.4845 -0.06% Spot yuan 6.4868 6.4921 0.08% Divergence from -0.02% midpoint* Spot change YTD 0.64% Spot change since 2005 27.59% revaluation Key indexes: Item Current Previous Change Thomson 95.75 95.87 -0.1 Reuters/HKEX CNH index Dollar index 90.68 90.768 -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 6.4925 -0.09% * Offshore 6.6285 -2.12% 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. . ($1 = 6.4860 Chinese yuan renminbi) (Reporting by Andrew Galbraith in Shanghai; additional reporting by Han Xiao in Beijing; editing by Richard Pullin)