* Yuan opens at strong-side limit of trading band
* C.bank midpoint restrains excessive appreciation
* Yuan at all-time high of 6.2380/dlr
* Entrenched appreciation trend saps demand for dollars
SHANGHAI, Oct 26 (Reuters) - China's central bank reined in the yuan's appreciation on Friday as the currency hit a record high and bumped against the upper limit of its trading band for the second straight day.
The central bank set its daily midpoint at 6.3010 versus the dollar on Friday morning, the strongest midpoint level since June 20. That granted the yuan more space to appreciate after the currency closed at its strong-side limit of 6.2417 on Thursday.
But the extra space was used up on the very first trade, as the yuan opened at 6.2380, its strongest level ever. The rate stayed firmly at that level through the first 90 minutes of trade.
Thursday marked the first time on record that spot yuan has bumped up against the strong-side limit. The central bank allows the exchange rate to rise or fall by 1 percent from the mid-point it sets each morning. That band was increased from 0.5 percent in April this year.
Some analysts have speculated in recent weeks that the People's Bank of China is intervening to strengthen the currency in response to anti-China rhetoric in the U.S. presidential election campaign.
But recent events suggest that the PBOC's stronger fixings have primarily acted as a restraint against what authorities might consider excessive appreciation, rather than the cause of such appreciation.
Traders say that demand from both corporations and banks is behind the yuan's rally. With the appreciation trend seemingly entrenched, market participants fear delaying their yuan purchases will mean paying a higher price.
``The feeling now is you're going to take losses if you wait,'' said a trader at a mid-sized Chinese bank in Shanghai.
That concern marks a full reversal from earlier this year, when yuan depreciation and the dollar's strength in global markets prompted both corporates and banks to build up their dollar holdings.
Indeed, traders say the urgency to trade dollars for yuan stems from the need to unwind long dollar positions that market players built up earlier this year.
``Dealers have also taken on a lot of dollars (earlier this year), but now everyone is inclined to sell them. No one is willing to hold dollars. So there are no bids (for dollars),'' said a trader at a joint-stock bank in Shanghai.
Traders mostly doubt that the yuan hitting its upper limit will prompt the central bank to expand the yuan's daily trading band for a second time in a single year.
A more likely outcome, they say, is incremental reform to the way the midpoint is set. Officially, the midpoint is a weighted average of contributions from all dealers in the China Foreign Exchange Trade System, China's interbank market.
But market players widely view the midpoint as an expression of the central bank's intentions for the currency. The dealer banks whose contributions are most heavily weighted in setting the midpoint are state-owned enterprises subject to government influence.
(Additional reporting by Shanghai Newsroom; Editing by Eric Meijer)