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The yuan was little changed on speculation policy makers would halt a 26-month run of gains to help exporters weather a global slowdown and sustain economic growth.
The central bank yesterday lowered the reference rate for yuan trading for a ninth straight day, the longest run of declines since a peg against the dollar was scrapped in 2005. The currency is allowed to trade by up to 0.5 percent on either side of the rate, which was set at 6.8638 per dollar.
The yuan traded at 6.8577 a dollar as of 5:30pm in Shanghai, according to the China Foreign Exchange Trade System.
The currency retreated in each of the last two weeks after the government said it aimed to sustain economic growth as well as combat inflation. The yuan pared its daily loss yesterday after a government report showed that producer prices rose 10 percent from a year earlier in July, the fastest pace since 1996. It fell as much as 0.1 percent to 6.8664.
The central bank has allowed the yuan to strengthen 6.5 percent versus the dollar this year, the biggest gain among Asia's 10 most-traded currencies outside Japan. A stronger yuan helps curb import costs and contain inflation, Bloomberg News said.
China's trade surplus climbed 4 percent to US$25.3 billion in July from a year earlier, the first gain in four months, customs bureau figures showed yesterday. Overseas shipments grew 26.9 percent, compared to 17.2 percent in June.
So-called non-deliverable forward contracts indicate investors have been scaling back bets on currency gains. They signal the yuan will reach 6.6060 per dollar in the next 12 months, an advance of 3.8 percent from the current exchange rate.
China's currency gained 10.4 percent in the past year and has strengthened 17 percent since May 2006, the last time it posted a monthly loss. The yuan has dropped 0.4 percent so far this month.
Government bonds due in more than three years fell after the finance ministry sold 20-year notes at an average yield of 4.94 percent. The government auctioned 24 billion yuan (US$3.5 billion) of bonds due August 2028, the first sale of the maturity this year.
The sale drew 37.3 billion yuan in bids, or 1.54 times the amount on offer. The highest winning bids at auction were 5 percent, according to traders at the Industrial and Commercial Bank of China and China Construction Bank in Beijing.
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