SHANGHAI, June 6 (Reuters) - China's yuan firmed on
Thursday as the dollar eased on renewed bets of a U.S. Federal
Reserve easing cycle this year, with market participants
awaiting a policy decision from the European Central Bank later
in the day for its interest rate outlook.
    Prior to the market open, the People's Bank of China set the
midpoint rate, around which the yuan is allowed to
trade in a 2% band, at 7.1108 per U.S. dollar, weaker than the
previously fixed 7.1097. 
    In the spot market, the onshore yuan opened at
7.2441 per dollar and was changing hands at 7.2447 at midday, 30
pips stronger than the previous late session close. 
    Expectations that the Fed would likely cut interest rates in
September, after data this week hinted the U.S. labour market
was easing.
    Markets have priced in nearly 50 basis points of Fed rate
cuts this year, with the first expected to come in September.
    Investor focus is also on the U.S. nonfarm payroll (NFP)
report for May due on Friday, with a Reuters poll of economists
expecting it to increase by 185,000 jobs.
    Meanwhile, a rate cut is also widely expected from the ECB
later in the day. 
    Maybank analysts expected the dollar index to be
traded between 104.00 and 105.00 but it might drop a little
lower below that range if NFP reading is favourable.
    Adtionally, a private sector survey showed on Wednesday that
China's services activity in May accelerated at the quickest
pace in 10 months, while staffing levels expanded for the first
time since January, pointing to a sustained recovery in the
second quarter.
    "We cannot rule out a slow creep up for the USDCNH and
USDCNY given unfriendly geopolitical environment where trade
tensions are rising with the U.S. and EU," said Maybank analysts
in a note. 
    The global dollar index fell to 104.102 from the
previous close of 104.268. The offshore yuan was
trading at 7.2562 per dollar. 
    The yuan market at 4:05AM GMT: 
 Item               Current  Previous  Change
 PBOC midpoint                         
                    7.1108   7.1097    
 Spot yuan                             
                    7.2447   7.2477    
 Divergence from                       
 Spot change YTD                       
 Spot change since 2005                
 revaluation                            14.24%
*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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan              
        *                        -0.16%
 non-deliverable          7.037  1.05%


 (Reporting by Shanghai Newsroom; Editing by Rashmi Aich)