Despite the central bank setting up a stronger mid-point for the Chinese currency, speculation that US interest rates will rise by the year end fueled  dollar buying which led to Yuan weakening on Tuesday.

“Investors are anxiously seeking clues to whether the US Federal Reserve will raise interest rates in the near term,” said a trader at a European bank in Shanghai.  “Once the U.S. hikes the rates, the yuan may breach the important 6.7 level,” he said.

According to Iris Pang, senior economist of Greater China at Natixis SA in Hong Kong, the weakening of Yuan suggests that the monetary authority may be starting to loosen some control.

It has been speculated by the traders that the People’s Bank of China (PBOC) had previously intervened in mid-July when it wakened past 6.7 per dollar for the first time in more than last five years.

The spot market opened at 6.6775 per dollar and was changing hands at 6.6816 at midday, 48 pips away from the previous late session close and 0.21 percent away from the midpoint. The offshore yuan was trading 0.13 percent weaker than the onshore spot at 6.6905 per dollar.