China guided the yuan lower at its sharpest pace since June on Monday, partly reversing the currency's gains last week.
The People's Bank of China (PBOC) set the yuan midpoint at 6.9262, a sharp drop for the renminbi compared with Friday's fixing at 6.8668.
China's central bank does not allow the currency to move more than 2 percent from its daily fixing in onshore trade. While policymakers cannot closely control offshore trade of the currency, it usually remains relatively close to its onshore counterpart.
Onshore, the dollar was fetching as little as 6.8679 yuan last week, compared with 6.9318 yuan at 9:54 a.m.
In offshore trade last week, the dollar was fetching as little as 6.7815 yuan amid a spike in overnight borrowing and deposit rates. At 9:49 a.m., the dollar was fetching 6.8666 yuan offshore.
The yuan's sharp tack was in part due to a spike downward in the U.S. dollar. Last week, the dollar index, which tracks the greenback against a basket of currencies, dipped as low as 101.300, from levels nearing 104, before popping back up to as high as 102.330 on Monday.
Analysts broadly weren't surprised by the yuan's retreat.
"We've had this brief rally now but we do expect further weakness," Daniel Morris, senior investment strategist at BNP Paribas Investment Partners, told CNBC's "Squawk Box" on Monday.
He expected that the resumed depreciation would complicate China's relationship with U.S. President-elect Donald Trump, who vowed during his campaign to label the country a currency manipulator for the purposes of a competitive trade advantage and threatened to impose a 45 percent tariff on its exports to the U.S.
But Morris noted that the yuan was being driven by economic fundamentals, not manipulation for a trade advantage.
Other analysts agreed.
Dominic Schnider, head of commodity and Asia-Pacific foreign exchange at UBS Wealth Management, told CNBC's "Squawk Box" on Monday that Chinese authorities want to have a stable currency, as evidenced by the yuan's stability against its trade-weighted basket in recent months.
"The problem is the continuous outflow of capital will persist. It's structural in nature and that's going to burn the currency," Schnider said.
Indeed, the weakening in the yuan on Monday came amid fresh signs of fund outflows from the mainland. On Saturday, China reported that its foreign exchange reserves fell for a sixth straight month in December, declining by $41 billion for the month, to $3.011 trillion, the lowest since early 2011.
Analysts expected the outflows would continue.
"Capital outflow will be a multi-year process as private investors build holdings of offshore assets," Patrick Bennett, a foreign-exchange strategist at CIBC, said in a note on Friday. "This in and of itself should not be feared. But it will in the medium-term keep depreciation pressure on the yuan."
But he noted that in recent months, China has been stepping up its policing of outflows.