Wang Qinwei, China economist for Capital Economics, cites a surge in foreign currency deposits in China, which on the books are classified as an outflow, as likely pressuring the central bank to sell reserves.
"Fears about capital leaving China are overdone," he wrote in a report, adding that "firms are in less of a hurry to exchange foreign currency receipts into renminbi now that expectations for renminbi appreciation have fizzled out."
The State Administration of Foreign Exchange said in a report in March that "expectations on the yuan's unilateral appreciation have been broken", citing volatility in global markets from late last year.
"The weakening of the Chinese yuan indicates that the currency now fluctuates on both sides and suggests it has become more flexible, which is good for the Chinese economy," Juzhong Zhuang, deputy chief economist at the Asian Development Bank in Manila, said in an email.
Longer term, economists say the yuan's prospects for a return to strengthening mode depend on recovery in the broader global economy and the government carrying out structural reforms.
Last month, the International Monetary Fund said the yuan was now more closely aligned with China's overall economy, yet remained "moderately undervalued."
A stronger currency would increase household purchasing power and facilitate reform of the financial sector, among other positives, the IMF said in a report.
"Currency appreciation continues to be an important component of the package of reforms needed to transform China's economy," it said.
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service