(Bloomberg) -- A slump in the yuan deepened on Friday after the central bank weakened its daily reference rate for the currency by the most in two years.

The People’s Bank of China weakened the fixing by 0.9 percent to 6.7671 per dollar, the lowest level since July 2017. While the rate was in line with the average forecast of traders and analysts in a Bloomberg survey, the yuan erased gains after the move, falling 0.3 percent to 6.8131 per dollar as of 9:26 a.m. in offshore trading.

Bets for further monetary easing and speculation the authorities are sanctioning the losses by not intervening have helped make the yuan the worst performer among more than 30 major currencies in the past month. The question is how much more weakness officials can tolerate.

"The fixing reflects the PBOC’s higher tolerance for yuan weakness," said Ken Cheung, senior Asian foreign-exchange strategist at Mizuho Bank Ltd. in Hong Kong. "Such rapid and sharp depreciation could trigger capital outflows pressures pressure and undermine financial stability. China may issue verbal support soon."

The currency starts trading in the domestic market at 9:30 a.m.

To contact the reporter on this story: Tian Chen in Hong Kong at tchen259@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, David Watkins

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