SHANGHAI, Aug 20 (Reuters) - China"s yuan slid through a key threshold on Friday and looked set for its worst weekly performance in two months, pressured by a much weakened official guidance rate and broad dollar strength amid growing risk aversion in global markets. The safe-haven U.S. dollar hovered near a 9-1/2-month high against major peers, buoyed by fears that the fast spreading Delta coronavirus variant could delay the global economic recovery. Prior to the market opening, the People"s Bank of China (PBOC) set the midpoint at 6.4984 yuan per dollar, 131 pips or 0.2% softer than the previous fix of 6.4853, and the weakest since April 21. However, the weakened official guidance rate pushed China"s trade-weighted yuan basket index higher again to 99, its highest since March 9, 2016, according to Reuters" calculations based on official data. In the spot market, the onshore yuan opened at 6.4950 per dollar and quickly weakened past the psychologically important 6.5 per dollar level before changing hands at 6.5014 at midday, 67 pips softer than the previous late session close. If the spot yuan finishes the late night session at the midday level, it would have lost 0.38% to the dollar for the week, the biggest weekly drop since mid June. Traders said continued strength in the basket index could bring disadvantages to China"s exporters, who are also facing rising raw material costs. "The basket index is too high now. The yuan has been trading sideways for so long, so it"s time for it to move a little bit," said a trader at a Chinese bank. But several traders said it was too early to tell if the Chinese currency would catch up with losses seen in other emerging market currencies recently. They noted some corporate clients quickly emerged to sell dollars on Friday morning, slowing the pace of the yuan"s declines. Separately, China left its benchmark interest rate unchanged on Friday for the 16th consecutive month but that did little to dampen expectations that authorities will need to boost stimulus to counter a slowdown in the world"s second-largest economy. "We think pressure to relieve the financing strains of indebted borrowers will intensify over the coming months as the economy"s strong rebound from COVID-19 starts to go into reverse," Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note. "As a result, alongside further RRR reductions we expect three 10-basis point cuts to the PBOC"s policy rates over the coming year, starting next quarter," he added, noting any rate reductions are likely to be primarily aimed at reducing financial strains rather than supporting credit growth. Monetary easing should theoretically put downside pressure on the yuan in the short term, which would intensify if the U.S. Federal Reserve begins tightening policy soon, giving a further boost to the dollar. By midday, the global dollar index stood at 93.53, while the offshore yuan was trading at 6.5073 per dollar. The yuan market at 0407 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.4984 6.4853 -0.20% Spot yuan 6.5014 6.4947 -0.10% Divergence from 0.05% midpoint* Spot change YTD 0.41% Spot change since 2005 27.30% revaluation Key indexes: Item Current Previous Change Thomson 98.84 98.89 -0.1 Reuters/HKEX CNH index Dollar index 93.53 93.575 0.0 *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 6.5073 -0.09% * Offshore 6.6816 -2.74% 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 Kim Coghill) Our Standards: The Thomson Reuters Trust Principles.