Yuan falls by most in two years after January trade data
China's currency slumped overnight after hitting a two-year high the day before, following the release of weaker than expected foreign trade data, which some investors believe may goad Beijing nearer to loosening capital controls as a means of offsetting recent strength in the yuan.
As of 1057 GMT, the yuan was at 6.33 against the US dollar, down by 1.2%, its biggest one day fall since China devalued the currency in 2015.
Significantly, on Thursday morning Reuters also reported that officials in Beijing were looking at easing curbs on outbound capital flows.
Overnight, it was reported that in local currency terms Chinese import growth accelerated from a 0.9% year-on-year pace in December to 30.2% for January (consensus: 5.3%).
Exports on the other hand were only slightly stronger than forecast, printing at up by 7.4% on the year versus a 6.0% rise for December (consensus: 2.6%).
Combined, trends in exports and imports saw China's trade surplus more than halve in US dollar terms to $20.34bn last month, down from $54.1bn in the month before (consensus: $54.7bn), according to the General Administration of Customs.
Thursday's figures followed the release of foreign exchange reserve data the day before which had already stoked varying degrees of speculation among analysts that China might move to lean against yuan strength.
Nonetheless, analysts at Capital Economics cautioned against reading too much into January's trade data due to the possible distortions arising from the Chinese Lunar New Year holidays in February.
The yuan had gained 3.5% against the Greenback in January, although on a trade-weighted basis it was only 0.7% stronger.
Capital Economics's forecast was for the yuan to weaken to 6.4 by the end of 2018.