Chinese yuan notes.
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China set the daily middle rate for the yuan on Tuesday to a level that has not been seen for more than a decade, as Beijing remains trapped in a protracted trade war with Washington.
The People's Bank of China set the middle rate at 7.0810 per dollar – weaker than the previous day's fix, but stronger than the market expected level of 7.1
With the yuan's midpoint higher than expected, China could signal to markets that Tommy Xie, head of Greater China research at OCBC Bank in Singapore, might slow the devaluation of the currency wants, said CNBC.
"Although China was more open to its currency regime," Xie said via email. As Beijing gives the markets a "greater role in deciding (over) the currency, China is still carefully monitoring the pace of movement," he added.
Weakening of the Yuan
From 12:41. HK / SIN, the mainland-only onshore yuan, heavily controlled by China, moved its hands to $ 7.1594, down 4% over the year.
China's central bank allows trading in the exchange rate within a narrow band of 2% above or below the daily average, which is fixed daily. If it goes too far, the PBOC usually intervenes to buy or sell the yuan and limit daily volatility.
The offshore yuan is traded in a floating market mainly in Hong Kong, but also in Singapore, New York and Singapore London; The yuan has been the focus of investors, economists and other market observers in recent months as it is seen as one of the tools China can use to respond to rising US tariffs.
7 yuan / dollar was considered a psychologically important level for a long time – but the onshore exchange rate fell above this level for the first time since the global financial crisis of 2008 and has since remained above 7 yuan. The injury prompted the US Treasury to designate Beijing as a currency manipulator.
The US rejects a lower yuan than a weaker currency, cheapening a country's exports to international markets and giving them a trade advantage over their competitors.
] Analysts have not yet reached consensus on what the next closely watched level for the yuan might be. But most say it depends on how the trade war escalates or de-escalates.
Predicting the future of the yuan
Xie of OCBC told CNBC that the onshore yuan could trade near between 7.1 and 7.2 against the dollar in the short term, without further external shocks from the trade war.
Last week, tensions between the world's two largest economies increased after China announced new US $ 75 billion in tariffs to remunerate additional US tariffs announced in August.
In direct response to China's move, US President Donald Trump announced that his government would raise existing US $ 250 billion in tariffs on Chinese products from 25 percent on October 1 to 30 percent. Tariffs on additional $ 300 billion in Chinese goods are set to come into force on September 1, and will now be 15% instead of 10%, he added.
Rough calculations have shown that the onshore yuan will "likely" increase US tariffs on all Chinese goods to 25% increase to around 7.88 to offset the impact of tariffs, "the source said National Australia Bank foreign exchange strategy team in a service advocate.
"If the threat rises to 30% over the weekend, then the USD / CNY equivalent compensation is more like 8.19."
In 2005, when the Yuan was still tied to the US dollar, the pair was still quoted at 8.28.
"These are more downside risk scenarios than our current expectations. We recognize that in the face of increasing economic hardships worldwide, investors could tackle a round of currency wars in the APAC region, which will also support the (dollar) in the EU. "The NAB strategists wrote.  Economic data released in recent months also point to a slowdown in the Chinese economy.
Goldman Sachs analysts wrote in a Monday bulletin that they expect policymakers to take some approaches at least "steps to this To tackle the problem of monetary policy "- this would include modest cuts in the medium-term credit facility and open market operations rates as well as credit and fiscal policies.
Analysts said they would move their yuan forecast to 7.2 yuan for $ 1 in the next 3-6 Months and 7.1 per dollar over the next 12 months.
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– Reuters contributed to this report.