China reportedly intervened in the foreign exchange markets in final minutes of trading Wednesday after the yuan hit a four-year low.
Spot yuan in China slid to as low as 6.4510 per dollar, its weakest since August 2011, after the central bank set its daily midpoint reference at 6.3306, even weaker than Tuesday's devaluation.
The currency fared worse in international trade, touching 6.59 to the dollar.
On Tuesday, China unveiled a commitment to set the yuan's daily fixings according to the previous day's closing spot prices and market-moves of other major currencies. The move sent the Chinese currency dropping more than 2 percent to its lowest level against the dollar in nearly four years.
The yuan has lost 3.5 percent in China in the last two days, and around 4.8 percent in global markets.
Sources told The Wall Journal that following further precipitous declines in the yuan on Wednesday, the Peoples Bank of China told state-owned banks to sell dollars on its behalf in the last 15 minutes of Wednesday's trading, causing the yuan to jump about 1 percent against the greenback.
China is probably going to need to be on both sides of the currency market for a while, former Pimco chief economist Paul McCulley told CNBC's "Squawk Box," reacting to the news.
"This is not a just one-off 2 percent devaluation, it is part of a mosaic of trying to have the currency be a more global-orientated currency," he said. "They want to move to a more market-determined exchange rate."
"Markets can't figure it out immediately," McCulley added. "There is no textbook you can pull off the shelf," calling this a real-time learning experience.
Mark Luschini of Janney Montgomery Scott urged caution on the part of U.S. investors. "What this is likely to lead to is a currency skirmish as other countries are going to have to step in and devalue in order to keep their export activity up," he said in an interview on CNBC's "Squawk on the Street."
Luschini said the move could have serious spillover effects for the emerging market activity at large.
"Are they [China] pulling on all the levers sufficiently to be able to drive economic growth and reflate activity to a point where investors can tease out data that suggests that something near the 7 percent GDP print that they posted is legit?" he asked.
—Reuters contributed to this story.