The Japanese yen, considered a safe-haven currency by investors, soared in early Asian trade, triggering massive stop-loss sales of the U.S. and Australian dollars in very thin markets amid heightened worries about the global economy after tech giant Apple Inc cut its earnings guidance.

Traders said the impact of the FX "flash crash" in currency markets also weighed on the yuan, but losses were capped by strength in the yen.

"Rises in the yen offset weakness in some G7 non-dollar currencies," said a trader at a Chinese bank in Shanghai. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8631 per dollar, 149 pips or 0.2 percent weaker than the previous fix of 6.8482.

In the spot market, the onshore yuan opened at 6.8700 per dollar, fell to a low of 6.8787 per dollar before changing hands at 6.8767 by midday, 147 pips weaker than the previous late session close and 0.20 percent softer than the midpoint.

Some market participants said the yuan was likely to remain trapped in a thin range in holiday-thinned trade although focus will be on upcoming trade talks between the world's two largest economies due to be held in Beijing this month.

Analysts at China Construction Bank (Asia) said in a note on Thursday that downward pressure on the Chinese economy could lead to further monetary policy easing, but "relieving Sino-U.S. trade disputes will remove risk premium in USD/RMB to support the yuan". They expect the yuan to trade at 6.6 per dollar at the end of 2019.

Separately, the PBOC said late on Wednesday it had relaxed its conditions on targeted reserve requirement cuts to benefit more small firms, in the latest move to support the slowing economy.

The offshore yuan was trading at 6.8859 per dollar at midday.