The central parity rate of the Chinese currency, the yuan, continued to weaken against the U.S. dollar after China relaxed control on capital outflows and the dollar rebounded from last week's drop.
The central parity rate of the yuan weakened 105 basis points to 6.5382 against the U.S. dollar, according to the China Foreign Exchange Trade System.
On the previous trading day, the central parity rate of yuan ended a record 11-day rise against the U.S. dollar by weakening 280 basis points.
The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The U.S. dollar index, a measure of the dollar against a basket of other major currencies, rebounded this week after skidding to a two year low of 91.011 Friday after market worries over geopolitical tensions on the Korean Peninsula and Hurricane Irma eased.
On Tuesday, the dollar index continued to rally to around the 92 level.
China's central bank announced Monday that it had scrapped reserve requirements of 20 percent for financial institutions settling foreign exchange forward yuan positions.
Meanwhile, the central bank's substantial supervision of reserves put aside by foreign financial institutions was also loosened.
The move is expected to make it cheaper for companies and investors to buy dollars while selling the yuan, and thereby help ease the pace of the Chinese currency's recent rally, analysts said.
Huang Zhilong, senior researcher with Suning Financial Research Institute, said it was normal to see a retreat after 11 consecutive daily gains, and the yuan-dollar exchange rate would maintain two-way fluctuations under the current exchange rate formation system.
