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Yuan midpoint firms slightly, spot prices glued to edge of band

* C.bank fixes slightly higher midpoint despite stronger dollar

* Spot exchange rate trades at strong side of limit all morning

* Corporates eroding hard currency reserves to buy yuan - strategist

* Disconnect between midpoint, spot market not sustainable

SHANGHAI, Nov 6 (Reuters) - China's central bank set a slightly firmer midpoint on Tuesday but corporates continued to swap out dollars for yuan, causing the exchange rate to once again bump against its strong-side limit.

The central bank set its midpoint at 6.3078 per dollar, slightly firmer than Monday's fix.

The move was a break from its usual custom of setting the midpoint in inverse relation to overnight moves in the dollar index, which has been on an upward trend since mid-October.

But on Tuesday the central bank ignored a move upward in the DXY and pushed the yuan firmer, possibly because Chinese companies' enthusiasm for yuan has temporarily disconnected the spot market from short-term moves in the dollar.

The spot yuan opened at the limit of the trading band at 6.2447 Tuesday morning and stayed there.

The exchange rate is allowed to rise or fall 1 percent from the midpoint each day, and on normal trading days the currency stays well within this range.

But as a result of the contradiction between what the central bank is signalling and what spot market participants want to buy, the yuan spot rate has rubbed up against the edge of its trading band for six consecutive trading days.

Today's spot rate graph is an extreme example, resembling a flatlined electrocardiogram, with only three transactions occurring away from the intraday limit. (Graphic: http://link.reuters.com/mew73t)

``Corporates do not have the dollars to buy the CNY; their dollar flows are negative so they are drawing down their dollar reserves,'' said Dariusz Kowalczyk, economist at Credit Agricole CIB, pointing out that data showed that Chinese corporations sent more hard currency abroad that they received in September.

``That is not sustainable.''

He said that corporates may be buying yuan because they think domestic growth is set to recover, but he and other traders said they could give no definitive explanation for the phenomenon.

Traders repeated speculation that Beijing is deliberately pushing the yuan up ahead of the U.S. presidential election, but that still begs the question of why the spot market appears to be ignoring central bank guidance.

``Nobody can predict what the afternoon will be like,'' said a trader at a joint-stock bank in Shanghai. ``But there are very few people interested in buying dollars.''

(Additional reporting by Li Wenke; Editing by Kim Coghill)