As of 0400 GMT, the yuan was down 0.03% at 7.2637 to the dollar, having fluctuated between 7.2565 and 7.2677.
On Wednesday, Reuters reported, citing sources, that China's senior leaders and policymakers are contemplating a yuan depreciation in 2025 in anticipation of increased U.S. tariffs should Donald Trump return to the presidency.
Following this news, the yuan, along with other Asian currencies, declined against the dollar.
Compounding the pressure on the yuan, Chinese long-term yields have dropped to historic lows due to expectations of monetary easing, resulting in the largest yield gap with the U.S. in 22 years.
Before the market opened, the People's Bank of China established the midpoint rate, which allows the yuan to trade within a 2% band, at 7.1854 per dollar, remaining relatively stable from the previous session and 584 pips stronger than a Reuters estimate.
Currency traders are also anticipating the results of a significant economic policy meeting to gain clarity on monetary and fiscal easing strategies for the upcoming year.
In a follow-up article to the Reuters report, Financial News, the publication of the PBOC, stated that the foundation for a "basically stable" yuan exchange rate remains "solid," suggesting that the currency is expected to stabilize and strengthen towards the end of the year, which helped the yuan recover some of its losses.
HSBC analysts indicated that markets should await a statement from the Central Economic Work Conference, an annual gathering of Communist Party leaders, to determine if there will be a change in Beijing's approach to the yuan.
Rong Ren Goh, a portfolio manager at Eastspring Investments, remarked that it is not surprising for Chinese authorities to consider allowing the currency to weaken as a strategy to counteract the effects of tariffs.
He anticipates a measured and gradual adjustment of the yuan, as opposed to a sudden and uncontrolled decline that might disrupt financial markets.
The Chinese currency has experienced a decline for ten consecutive weeks, influenced by U.S. President-elect Trump's tariff warnings and the differing monetary policies of China and the United States.
In Asian trading, the offshore yuan was valued at 7.2661 yuan per dollar, reflecting an increase of approximately 0.19%.