Prior to market opening, the People's Bank of China (PBOC) lowered its midpoint rate for the third straight day to 6.6322 per dollar, 54 pips or 0.08 percent weaker than the previous fix of 6.6268 on Tuesday.
Wednesday's midpoint was the weakest since Oct.9. And traders said the official guidance was in line with their forecasts.
Onshore yuan
Traders said the market was largely balanced on Wednesday morning, with spot yuan tracking the dollar. The greenback was bolstered by speculation of a more hawkish Federal Reserve chief.
U.S. President Donald Trump used a lunch with Senate Republicans on Tuesday to get their views on who he should tap to be the next leader of the Fed, according to senators who attended.
A source familiar with the matter said Trump polled the Republicans on whether they would prefer Stanford University economist John Taylor or current Fed Governor Jerome Powell for the job.
More senators preferred Taylor over Powell, the source said. Taylor is seen as someone who may put the Fed on a path of faster interest rate increases.
Some market participants expect volatility in yuan trade to pick up after the Communist Party Congress, which finished on Tuesday. The market had remained largely stable during the congress, with ample liquidity in the country's financial system.
"It will be interesting to gauge just how much of a 'decisive role' the market will play in the economy into year end," Stephen Innes, head of Asia-Pacific trading at OANDA in Singapore said in a note.
"So far these comments are following on deaf ears as its likely state-owned entities were keeping the market in check over the China summit to avoid any extreme awkwardness," he said.
A dealer at a Chinese bank in Shanghai said the domestic market would keep a close eye on the global dollar index <.DXY> in the near term.
He said the yuan would face some renewed downward pressure if the dollar index breached the 94 level soon. The global dollar index rose to 93.984 as of midday from the previous close of 93.772.
The Thomson Reuters/HKEX Global CNH index <.RXYH>, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.66, firmer than the previous day's 95.61.
The offshore yuan was trading 0.06 percent weaker than the onshore spot at 6.6394 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs)
One-year NDFs are settled against the midpoint, not the spot rate.
(Reporting by Winni Zhou and John Ruwitch; Editing by Jacqueline Wong)
