The onshore yuan opened at 6.8282 per dollar, eased to a low of 6.8316 before ending its domestic trading session at 6.8255.

If the yuan's late night closing session matches the domestic finish, it would have lost 3 percent against the dollar in July for the fourth consecutive monthly loss. The Chinese currency has shed more than 8 percent since the end of March.

Currency traders said the yuan was little affected by downbeat economic data early in the session that showed growth in China's manufacturing sector slowing more than expected in July. The trade dispute with Washington, bad weather and weaker domestic demand dented factory activity.

"This is just the beginning of the trade war," Iris Pang, ING Greater China economist at ING said in a note after China published its official purchasing managers' indexes for July.

If things get worse for China's exporters, "this would push the yuan even weaker. Our USD/CNY forecast is at 7.0 by the end of 2018."

Prior to Tuesday's market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8165 per dollar, 34 pips weaker than the previous fix of 6.8131.

The offshore yuan was trading at 6.8363 per dollar as of 0830 GMT.

Traders said some investors have started to become cautious after the yuan's sharp losses the past few weeks, and took profit from their long dollar positions once the yuan weakened past 6.83 on Tuesday morning.

"Market participants seem to be cautious to potential PBOC's FX intervention and refrained from selling the CNH and CNY aggressively at the current level, as further RMB weakening could trigger one-way RMB depreciation expectation and severe capital outflow pressure," Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong, said in a note.