Reuters reported on Wednesday that China has made unprecedented proposals in talks with the United States on a range of issues including forced technology transfer as the two sides work to overcome remaining obstacles to a deal to end their protracted trade war.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to meet with Chinese officials on Thursday.
The yuan was also pressured by a resilient U.S. dollar, which firmed slightly despite worries of its own as sliding Treasury yields signalled a future recession for the world's biggest economy. The Brexit uncertainties and the prospect of slower global growth drove investors to the safety of the dollar and the Japanese yen.
That sent spot yuan to the weaker side of 6.74 per dollar for the first time since February 19. The currency rebounded to 6.7305 by midday, still 40 pips weaker than the previous late session close and 0.06 percent softer than the midpoint.
The People's Bank of China set the midpoint rate at 6.7263 per dollar prior to market open, softer than the previous fix of 6.7141.
The dollar index measured against a basket of its peers retreated slightly in Asia morning trade, but remained up 0.1 percent from the previous close. With no clear outcome yet in the trade talks, the yuan may track dollar movements in the near term, said a Shanghai-based trader, who expects the Chinese currency to trade in the 6.73 area.
"From a technical standpoint, the dollar index has not breached its critical level, at around 97, yet," said a second trader in Shanghai. "The renminbi is also facing technical resistance at the 6.74 level."
Earlier on Thursday, Premier Li Keqiang reiterated Beijing's commitment to cutting real interest rates, without specifying which rate would be lowered, and said China has enough tools to deal with an economic slowdown.
Analysts are also expecting the inclusion of Chinese bonds in the Bloomberg-Barclays Global Aggregate Index, scheduled to start next week, to provide support for the yuan in coming sessions.
"With a likely trade deal and government measures having a positive economic impact in the latter part of the year, alongside with an expected rise in portfolio flows, we expect USD/CNY to end this year at 6.65," analysts at ANZ, who previously set the target at 6.75, wrote in a note on Thursday.
The offshore yuan was trading 0.11 percent weaker than the onshore spot at 6.7378 per dollar, up 0.01 percent from the previous close.