SHANGHAI, Nov 5 (Reuters) - China"s yuan softened on Friday after the central bank set a weaker daily fixing, with the U.S. dollar headed for its second straight week of gains as traders awaited a U.S. jobs report for clues to the timing of Federal Reserve rate hikes. But the Chinese currency hit new multi-year highs against a trade-weighted currency basket after the Bank of England"s decision to keep its rates steady hammered the pound. Reuters calculations showed China"s trade-weighted CFETS yuan basket index rising to 100.83 on Friday morning, its highest since January 2016. "After expectations for a Bank of England rate hike fell through, the market may reevaluate the thinking of overseas central banks, and take a look at officials" comments and U.S. non-farm payrolls," said a trader at a foreign bank. The Bank of England kept interest rates on hold on Thursday, surprising investors who had been convinced that it would raise borrowing costs after the COVID-19 pandemic. Before the market open on Friday, the People"s Bank of China set the yuan"s daily midpoint at 6.398 per dollar prior to market open, slightly weaker than the previous fix of 6.3943. Spot yuan opened at 6.3955 per dollar and was changing hands at 6.4009 at midday, 29 pips weaker than the previous late session close, pressured by a firmer dollar overnight. A broad dollar index rose to 94.34 from the previous close of 94.325. Ding Muqiao, an analyst at China Merchants Bank, said that the timing of interest rate hikes would remain a key trading theme, adding that he expects the dollar index to remain around the 94 level, with the yuan fluctuating around 6.4 per dollar in the near term. In the medium to long term, stronger inflation data and a weaker-than-expected recovery in employment could prompt a change in attitude from the Fed, and interest rate hike expectations could boost the dollar, he said. The offshore yuan softened to 6.3994 per dollar from Thursday"s close of 6.3965. The yuan market at 0415 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.398 6.3943 -0.06% Spot yuan 6.4009 6.398 -0.05% Divergence from 0.05% midpoint* Spot change YTD 1.99% Spot change since 2005 29.30% revaluation Key indexes: Item Current Previous Change Thomson 100.73 100.71 0.0 Reuters/HKEX CNH index Dollar index 94.34 94.325 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 6.3994 0.02% * Offshore 6.5767 -2.72% 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 Andrew Galbraith in Shanghai and Xiao Han in Beijing; Editing by Jacqueline Wong)