SHANGHAI, May 31 (Reuters) - China’s central bank lifted its official yuan midpoint to a new three-year high against the dollar on Monday, with its trade-weighted basket index touching the loftiest level since 2016. The People’s Bank of China (PBOC) set the midpoint rate at 6.3682 per dollar prior to the market open, 176 pips or 0.28% firmer than the previous fix of 6.3858 on Friday. It was the strongest guidance rate since May 17, 2018. The firmer fixing also pushed the trade-weighted yuan basket index up to 98.22, the highest since March 29, 2016. Markets had widely believed that the 98 mark represented the ceiling for the yuan’s basket index - a too high reading for the index could disadvantage the yuan on exchange rates versus its trading partners. (Reporting by Winni Zhou and Andrew Galbraith Editing by Shri Navaratnam) Our Standards: The Thomson Reuters Trust Principles.