Official data indicate China has steadily sold U.S. Treasurys this year, with the main question now being the pace of sales as the Federal Reserve gets set to hike its benchmark interest rate.
Expectations of a Fed rate hike in December, plus the uncertainty caused by the from the surprise U.S. presidential election win by Donald Trump, has put pressure on the yuan.
The offshore yuan rate touched a record low of 6.9441 against the dollar on Wednesday, Reuters reported, on a day that saw heavy U.S.-based selling of Treasurys as minutes from the U.S. central bank marked a clear road to a December rate hike. Reports said that traders had speculated Chinese entities were behind the selling of Treasurys futures in order to support the yuan.
The expected rate hike has already seen the dollar gain strength, with the dollar index, which measures the greenback against a basket of currencies, soaring this week. The dollar index last closed at 101.67 on Wednesday, the highest level since January 2003.
On Thursday the People's Bank of China (PBOC) set the yuan midpoint against the dollar at 6.9085, the weakest since June 10, 2008. China launched a managed float of its currency in July 2005 and since March 2014 has allowed the yuan to move within a 2 percent band around the daily fix.