SHANGHAI, July 29 (Reuters) - China"s yuan firmed to a near one-week high against the dollar on Thursday, fully recovering losses suffered earlier this week, thanks to a decline in the greenback on global markets and a sharp rebound in China"s share markets. The dollar hovered around a two-week low, weighed down by the latest insistence from Federal Reserve chairman Jerome Powell that rate increases are still some way off. China and Hong Kong stocks rebounded sharply in morning trade, after a series of official efforts to shore up investor confidence. Prior to market opening, the People"s Bank of China (PBOC) set the midpoint rate at 6.4942 per dollar, 13 pips weaker than the previous fix of 6.4929. In the spot market, onshore yuan opened at 6.4840 per dollar and rose to a high of 6.4724, the strongest level since July 23. By midday, it was changing hands at 6.4755, 150 pips firmer than the previous late session close. Traders said both onshore and offshore yuan bounced to the firmer side of the key 6.5 per dollar level on Thursday morning following the rebound in the stock market, as investor concern over risks of sharp capital outflows faded. Some of them expect the yuan to resume trading in a range of 6.45 to 6.5 per dollar seen last week, but some market analysts said despite the price rebound, the event risks might take a while before fully recovered. "The unpredictable changes in government policies pose huge challenges for the risk management, and it will take time for foreign investors to rebuild confidence for Chinese investments after the recent policy shocks," Ken Cheung, chief Asian FX strategist at Mizuoho Bank, said in a note. Earlier in the session, the PBOC injected 30 billion yuan through open market operations, snapping a 20-day streak of a minimal 10 billion yuan of daily injection. A trader at a foreign bank said although the volume was "not huge" it showed authorities wanted to soothe the markets" nerves after foreign investors retreated from bonds earlier this week. By midday, the global dollar index fell to 92.166 from the previous close of 92.258, while the offshore yuan was trading at 6.4786 per dollar. The yuan market at 0400 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4942 6.4929 -0.02% Spot yuan 6.4755 6.4905 0.23% Divergence from -0.29% midpoint* Spot change YTD 0.82% Spot change since 2005 27.81% revaluation Key indexes: Item Current Previous Change Thomson 98.14 97.96 0.2 Reuters/HKEX CNH index Dollar index 92.166 92.258 -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 6.4786 -0.05% * Offshore 6.6568 -2.44% 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 Simon Cameron-Moore) Our Standards: The Thomson Reuters Trust Principles.