The People's Bank of China set the midpoint rate at 6.7813 per dollar prior to the market open, weaker than the previous fix 6.7462.
In the spot market, the yuan opened at 6.7585 per dollar and was changing hands at 6.7515 at midday, 15 pips weaker than the previous late session close.
Pelosi's arrival on Tuesday in Taiwan, which China considers a breakaway province, prompted a furious response from Beijing at a time when international tensions already are elevated by Russia's invasion of Ukraine.
"Asian markets are likely to trade sideways watching the US-China developments," said OCBC Bank in a note.
China's foreign ministry said it lodged a strong protest with the United States, saying Pelosi's visit seriously damages peace and stability in the Taiwan Strait, while China's defence ministry said its military has been put on high alert and will launch "targeted military operations" in response.
The risk of escalation once Pelosi leaves the region would be the immediate focus for markets, said Stephen Innes, managing partner at SPI Asset Management.
"Beyond the military theatre, the issue to watch once Pelosi returns to the U.S. will be whether the White House talks tough on China."
The U.S. dollar index eased on Wednesday following a jump overnight, with Federal Reserve officials talking up the potential for further, aggressive interest rate hikes.
On Tuesday, San Francisco Fed President Mary Daly and Chicago Fed President Charles Evans signalled that they and their colleagues remain resolute and "completely united" over getting rates up to a level that will more significantly curb economic activity.
"After all, recent Fed's speeches suggested that the tightening cycle was far from over before restoring price stability," said Ken Cheung, Chief Asian FX Strategist at Mizuho Bank.
"Considering that monetary policy divergence between China and the U.S. might continue, China will still face relatively large capital outflow pressure, weighing on the yuan," wrote Zhang Ming, senior economist at the Chinese Academy of Social Sciences, in a note.
Zhang expected the currency to remain between 6.6 and 7.0 against the greenback in the second half of 2022.
The global dollar index fell to 106.063 from the previous close of 106.241. The offshore yuan was trading at 6.7605 per dollar.
The yuan market at 4:37AM GMT:
ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint
-0.52%
6.7813 6.7462
Spot yuan
6.75 -0.02%
6.7515
Divergence from
midpoint*
-0.44%
Spot change YTD
-5.87%
Spot change since 2005
revaluation 22.59%
Key indexes:
Item Current Previous Change
Thomson
Reuters/HKEX 0.0
CNH index
Dollar index
106.063 -0.2
106.241
*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan *
-0.13%
6.7605
Offshore
non-deliverable 6.712 1.03%
forwards **
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint..
(Reporting by Jason Xue and Brenda Goh; Editing by Kim Coghill)
