Goldman Sachs has shifted to an "outright negative" view on the yuan, blaming the change in sentiment on a "weak link" in the mainland's currency management strategy.
The bank's analysts said although Beijing had moved changed its focus to the yuan's against a basket of currencies, Chinese consumers and businesses had not shifted their mindset away from the currency's dollar exchange rate.
That created a risk that the central bank's daily fix of the yuan against the greenback - which has gradually weakened - could spark panic, despite Chinese authorities' attempts to de-emphasize its importance, Goldman warned.
"The government has clearly communicated a shift in focus to a trade-weighted currency basket, de-emphasizing the signal that the bilateral exchange rate versus the dollar carries," the bank said in a Friday note. "But domestically, the only signal that matters is the dollar-yuan."
The People's Bank of China's (PBOC) daily dollar-yuan fixes have recently been at level that suggested a desire for a weaker yuan. The spot currency is allowed to move 2 percent in either direction from the fix level during daily trade.
On Friday, the PBOC set the dollar-yuan fix at 6.5793, down slightly from the five-year high of 6.5889 set on June 1, up from a recent low of 6.4565 in early May.