SHANGHAI, Jan 11 (Reuters) - China"s yuan edged up against the dollar on Tuesday on robust corporate demand, but traders said opportunities for a break higher are limited as expectations that the U.S. Federal Reserve will move faster to hike interest rates underpin U.S. yields. Traders will be closely watching Fed Chair Jerome Powell later in the day for more clues on the central bank"s plans. Following prepared remarks for his nomination hearing on Monday in which he will pledge to prevent high inflation from becoming "entrenched", Powell will face questions from senators in his bid for a second four-year term. read more "In the short term I really don"t think the yuan is going to weaken much, as yuan longs will still find opportunities to enter," said a trader at a foreign bank. At the same time, "it"s difficult for the market consensus to turn based solely on the effect of Fed hikes." Corporate demand for yuan ahead of the long Lunar New Year holiday typically provides seasonal support for the currency. Before the market open, the People"s Bank of China (PBOC) set the midpoint rate at 6.3684 per dollar prior to market open, down from a two-week top on Monday of 6.3653. Spot yuan opened at 6.3740 per dollar and was changing hands at 6.3706 at midday, 62 pips firmer that Monday"s late session close. The offshore yuan firmed to 6.378 per dollar from a close of 6.3813. Expectations of higher U.S. rates continue to rise alongside rising U.S. inflation, with some of Wall Street"s biggest banks now flagging four possible hikes this year. read more In contrast, Chinese policymakers, increasingly focused on stabilising a slowing economy even before recent outbreaks of the novel coronavirus that causes COVID-19, are widely expected to maintain a loosening bias. The northern Chinese city of Tianjin reported 40 new confirmed coronavirus cases on Tuesday morning, as it battles an outbreak of the highly infectious Omicron variant of the virus. read more Analysts at ANZ said that they see a higher likelihood of a cut to the 1-year medium-term lending facility (MLF) rate, following a reduction in the loan prime rate in December. "The 1Y MLF rate is currently too high to be a medium-term pivot for banks" asset pricing because there have been structural changes in the costs of other liabilities," they said in a note. "Furthermore, China"s policy stance has shifted to growth stabilisation. The optimisation of the policy rate system will help to transmit liquidity that has accumulated in the banking system to the real economy," they said. The yuan market at 4:14AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.3684 6.3653 -0.05% Spot yuan 6.3706 6.3768 0.10% Divergence from midpoint* 0.03% Spot change YTD -0.24% Spot change since 2005 revaluation 29.92% Key indexes: Item Current Previous Change Thomson Reuters/HKEX CNH index 102.19 102.3 -0.1 Dollar index 95.869 95.991 -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 percent from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan * 6.378 -0.12% Offshore non-deliverable forwards ** 6.5074 -2.14% *Premium for offshore spot over onshore **Figure reflects difference from PBOC"s official midpoint, since non-deliverable forwards are settled against the midpoint. .