Yuan headed for a fifth weekly decline against the greenback

The yuan is headed for a fifth weekly decline against the greenback, the longest run of losses this year. The currency is also headed for its biggest weekly drop in a month against a trade-weighted basket of 13 currencies.

The yuan fell 0.33 percent from July 1 to 6.6842 per dollar in Shanghai, extending its decline over the past five weeks to 2 percent. The offshore yuan traded in Hong Kong dropped 0.3 percent for the week.

China's foreign-exchange reserves unexpectedly increased in June, signaling the monetary authority may have reduced intervention to support the yuan. Data released Thursday showed China’s reserves rose more than USD13 billion to USD3.21 trillion last month.

Increased expectations that the PBoC could further depreciate the local currency as it seeks to revive economic growth weighing on the yuan. As the PBOC continues to let the renminbi (yuan) slide against the dollar and demand for CNH continues to dwindle, serious concerns over the trajectory of the currency could re-emerge. CNY weakness could lead to another surge in capital outflows.

"China still faces significant capital outflow pressures, implying that further depreciation in CNY is inevitable. Notably, a weakening outlook on CNY will have negative consequence on the offshore market developments as well," said Commerzbank in a report.