SHANGHAI, Oct 26 (Reuters) - China"s yuan inched higher against the dollar on Tuesday, as talks between senior Chinese and and U.S. officials sparked hopes of an improvement in trade ties, including possible tariff reductions. China"s Vice Premier Liu He spoke with U.S. Treasury Secretary Janet Yellen on Oct. 26 via video call and talked about the macroeconomic situation and bilateral relations, according to China"s commerce ministry. The official readouts of the call from both sides encouraged traders and analysts to hope tensions would ease between the world"s two largest economies, raising chances for possible cuts to tariffs that were raised at the height of the U.S.-China trade war. "It could also show that inflation pressure was getting too high in the United States, reducing tariffs could benefit them too," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong. Prior to market opening, the People"s Bank of China (PBOC) set the midpoint rate at 6.389 per dollar, 34 pips or 0.05% firmer than the previous fix of 6.3924. In the spot market, onshore yuan opened at 6.3845 per dollar and was changing hands at 6.3830 at midday, 26 pips firmer than the previous late session close. Despite glimmersof optimism over Sino-U.S. relations, traders said it would be hard to see the yuan quickly rising past the key 6.35 per dollar mark, the strongest level the Chinese currency hit this year. "The yuan probably won"t have continued appreciation before a substantial cut to the tariffs," said a trader at a foreign bank. Separately, investors will pay attention to central bank meetings include European Central Bank (ECB) and Japan for possible policy guidance that could affect major currencies in global markets. By midday, the broad dollar index rose to 93.892 from the previous close of 93.842, while the offshore yuan was trading at 6.3815 per dollar. The yuan market at 4:00AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.389 6.3924 0.05% Spot yuan 6.383 6.3856 0.04% Divergence from -0.09% midpoint* Spot change YTD 2.28% Spot change since 2005 29.66% revaluation Key indexes: Item Current Previous Change Thomson 100.48 100.43 0.1 Reuters/HKEX CNH index Dollar index 93.892 93.842 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 6.3815 0.02% * Offshore 6.5637 -2.66% 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)