HONG KONG (BLOOMBERG) - China's yuan fell after the central bank set its daily fixing near 7 per US dollar, slightly weaker than expected.

The currency lost 0.1 per cent to 7.0320 on Wednesday morning (Aug 7), remaining weaker than the key level it breached on Monday for the first time since 2008. The offshore rate briefly dropped as much as 0.4 per cent as the People's Bank of China set the reference rate at 6.9996 per dollar. The fixing had been projected at 6.9977, according to the average estimate of 22 traders and analysts surveyed by Bloomberg.

The offshore yuan later pared losses, trading 0.3 per cent lower at 9:40am Hong Kong time.

"Investors may be concerned that the fixing may break 7 in the future, which will be seen as a sign that the room for depreciation remains to be large," said Tommy Xie, an economist at Oversea-Chinese Banking Corp, adding he sees Wednesday's rate as neutral. "The fixing in the coming days will send very important signals on the central bank's stance."

Traders are watching the daily fixing closely for signals after the PBOC allowed the yuan on Monday to weaken past a previously defended level of 7 for the first time in more than a decade, roiling global markets. The currency rebounded on Tuesday after the central bank took steps to curb losses and reassured foreign companies that it won't continue to weaken significantly.