The Chinese yuan opened lower on Monday following the Chinese central bank's decision over the weekend to double the currency's trading band and analysts told CNBC they expect it to continue weakening this year.
The People's Bank of China announced on Saturday a widening of the yuan trading band to two percent from one percent. The currency will now be allowed to trade two percent above or below a midpoint fixed by the central bank.
On Monday, the yuan was at 6.1607 per dollar in early trading after the daily midpoint was fixed at 6.1321.
Analysts told CNBC the yuan is set to continue to depreciate, as flows in and out of the country decline amid weaker sentiment.
"As the economy may weaken further in coming months and the cost of capital may drift lower, the [yuan] exchange rate could be mostly driven by short-term capital flows, which are likely outbound," said Minggao Shen, head of China Country Research at Citi Research.
"The supporting level of [yuan] should depend on export growth (benefiting from a weaker currency), domestic demand (i.e. investment opportunities) and following reform initiatives (which are necessary to lift the economy and market). In the longer term, the exchange rate could break down to below 6 [per dollar], but one-way appreciation is less likely," she added.