SHANGHAI: China’s yuan slipped on Thursday to hover near a three-week low, as the dollar firmed following hawkish Federal Reserve minutes, while tensions around Taiwan also kept investors nervous.

Prior to the market open, the People’s Bank of China (PBoC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1098 per US dollar, the weakest level since Jan. 23.

“The weaker CNY fix could be interpreted as more PBoC tolerance to allow the currency to weaken in line with regional peers,” UBS analysts said in a note.

“The challenge for the PBoC is to find the balance between a currency level that is conducive to growth, without driving capital outflows.”

In the spot market, the yuan opened at 7.2400 per dollar and was changing hands at 7.2433 at midday, 17 pips weaker from the previous late session close.