SHANGHAI: China's yuan on Thursday eased to a more than one-month low against the US dollar, which rallied on hopes that US President Donald Trump's administration is making progress on tax reforms.

The Chinese currency's decline prompted major state-owned banks to sell small amounts of dollars to prevent it from falling too fast, traders said.

The yuan has lost more than 3 percent of its value against the dollar since hitting a 21-month high in early August.

The currency's rapid rise earlier this year is likely to have unnerved authorities. However, the more recent decline is also likely to have made currency regulators uncomfortable.

Prior to market opening on Thursday, the People's Bank of China lowered its official yuan midpoint for the fourth day in a row to 6.6285 per dollar, the weakest level since Aug. 29, reflecting the broad dollar strength.

The greenback has rallied on expectations Trump may be able to forge ahead with ambitious fiscal reforms.

The official guidance was 93 pips or 0.14 percent weaker than the previous fix of 6.6192 on Wednesday.

Market participants said the central bank's official yuan fix came in below their forecasts, the third straight trading day in which it has undershot trader expectations.

The softer midpoint guided the spot yuan lower. The spot market opened at 6.6410 per dollar and fell to a low of 6.6605 per dollar at one point in morning trade, the softest level since Aug. 25.

As of the midday, the spot yuan was changing hands at 6.6572, 147 pips weaker than the previous late session close and 0.43 percent softer than the midpoint.

Traders said dollar demand by bank clients was heavy on Thursday, dragging the yuan lower and forcing state banks to sell small amounts of dollars at around the 6.65 yuan in an attempt to prevent the Chinese currency from falling too fast.

"There was some minor dollar selling from state banks in the morning," said a trader at a Chinese bank in Shanghai.

State-owned banks sold dollars in the forex market regularly late last year in what some traders believed was part of an official effort to prop up the yuan, which lost over 6 percent in 2016.

Several traders said the yuan could have fallen further though market players became wary of possible intervention after the yuan breached 6.65 level.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.4, weaker than the previous day's 95.5.

The global dollar index rose to 93.561 from the previous close of 93.361.

The offshore yuan was trading 0.06 percent weaker than the onshore spot at 6.6609 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 6.8185, 2.79 percent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.