The People's Bank of China (PBOC) set a midpoint that was almost unchanged, in line with recent signs that Beijing hopes to keep the currency relatively stable.
The yuan is likely to find a firm floor at 6.4 against the dollar for now but a sharp rise in the dollar index might prompt the Chinese central bank to guide the yuan lower at a measured pace, they said.
The dollar index was moving around 83.3 in Asian morning trade on Wednesday, within an arm's reach of its nearly two-year high of 83.542 points hit on June 1. Traders said if the dollar breaks through this resistance, it might push the PBOC to let the yuan fall slightly.
"Expectations that the dollar will strengthen further globally keep players from playing short on the US currency," said a dealer at a Chinese state-owned bank in Shanghai.
"But the PBOC has signalled that it would keep the yuan relatively stable," he said. "So unless there is a breakthrough in the dollar index, the yuan could stay around the current level, with a floor seen at 6.4 per dollar."
Spot yuan was trading at 6.3676 per dollar at midday, compared with Tuesday's close of 6.3659. The currency has recently persistently traded below the PBOC's midpoint, which is the base rate from which the PBOC allows the yuan to rise or fall 1 percent in a single day.
Before trade began, the central bank set the yuan's midpoint at 6.3209, marginally weaker than Tuesday's fix of 6.3195.
The PBOC has mostly set the midpoint stronger than 6.33/dollar level since it widened the yuan's trading band to 1 percent from 0.5 percent in mid-April.
The midpoint's weakest level since then, 6.3355 on May 31, meant that the yuan could fall as low as 6.3989 from the fixing. Traders interpret this as a signal that 6.4 versus against the dollar may be the weakest level that PBOC will tolerate for now.
Sentiment on the yuan has increasingly deteriorated this year amid signs that China's economy is slowing down more rapidly than forecast on top of a dollar rally in global markets.
China's economic growth slowed to a near three-year low of 8.1 percent in the first quarter, and a Reuters poll showed market players now expect GDP growth to fall to a three-year low of 7.6 percent in the second quarter.
Second-quarter GDP data will be announced on Friday.
The PBOC has recently set a series of midpoints stronger than the yuan's trading level, seeking to keep the exchange rate relatively steady.
Offshore one-year non-deliverable yuan forward contracts changed hands at 6.4170 on Wednesday afternoon to imply yuan depreciation of 0.77 percent against the dollar in the next 12 months based on the spot yuan's midday rate.
Offshore spot yuan was trading around 6.3670 around midday, roughly in line with the onshore spot level.