The People's Bank of China set the midpoint rate at 6.1397 per dollar prior to market open, lower than the previous fix at 6.1375.
The spot yuan opened at 6.2150 per dollar and was changing hands at 6.2171 at midday, 47 pips weaker than the previous close and 1.26 percent below the midpoint. It traded within a tight 6.2190 and 6.2130 range in morning trade.
The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.
A sudden turnaround in the dollar's fortunes overnight saw the currency trading broadly higher early in Asia on Friday, underpinned by a set of encouraging data on Thursday and a rise in US Treasury yields.
Analysts remain cautious on the outlook for the yuan as the world's second-largest economy saw its manufacturing activity slowing to a 11-month low in March. The dollar is also expected to strengthen as the US Federal Reserve moves closer to the day when it embarks on tightening policy rates.
The offshore yuan was trading 0.07 percent weaker than the onshore spot at 6.2215 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.3705, or 3.62 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate, and now that the trading band has been widened to 2 percent in either direction, corporates have become much more cautious when using the NDF to hedge given the basis risk inherent in them.
As a result the market has lost liquidity in recent years and has frequently proven an unreliable measure of market sentiment.