Earlier, U.S. Treasury Secretary Steven Mnuchin said he was "looking forward" to trade talks with China, as the two sides began high-level discussions in Beijing aimed at resolving a tariff war ahead of a March 1 deadline for a deal.

The trade dispute has been a major driver of risk sentiment over the past year, rippling through currency, equity, bond and commodity markets.

The yuan has been under pressure for much of last year due to a broad economic slowdown in China, though it has recently been resilient as Beijing has rolled out a flurry of measures to prop up growth.

Overnight, the dollar rose against a basket of six other major currencies and remained firm on the day. The index, is up 1.6 percent so far this month.

Prior to market opening on Thursday, the People's Bank of China (PBOC) set the midpoint rate at 6.7744 per dollar, 69 pips or 0.1 percent weaker than the previous fix 6.7675.

In the spot market, the onshore yuan opened at 6.7702 per dollar and was changing hands at 6.7620 at midday, 20 pips weaker than the previous late session close but 0.18 percent stronger than the midpoint.

The local currency barely reacted to better-than-expected January trade data released earlier in the day, as the focus was squarely on the U.S.-Sino talks which is set to wrap up on Friday.

A trader at a Chinese bank expects the yuan to swing in a tight range ahead of the outcome of the discussions. Beijing generally tries to keep the currency stable during major political or economic events.

The offshore yuan briefly rose to hit a high of 6.7655 at one point after Bloomberg reported U.S. President Donald Trump was considering a 60-day extension of the Mar. 1 deadline for higher tariffs on Chinese imports, citing unnamed sources.

The offshore yuan traded at 6.7720 per dollar as of midday.