"Major state-owned banks were selling dollars in morning trade", said a trader at a Chinese bank in Shanghai.
The PBOC drained a net 330 billion yuan last week via open market operations.
Zhou said downward pressure on the yuan remains and it may weaken about 2 percent annually against the U.S. dollar over the next two years.
CHINA'S economy is expected to grow 6.5 percent this year with the yuan weakening to 7.1 per U.S. dollar, Commerzbank said yesterday.
The months of June and July are usually characterized by high corporate United States dollar demand as some Chinese companies purchase the USA currency to pay dividends to their shareholders overseas.
Noting that the yuan had strengthened against the United States dollar in June, Rob Carnell, head of research at ING, said the PBOC has sent strong signals to the market that it "prefers appreciating currency".
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"We think this could have changed market expectation on the CNY and deferred the speculative capital outflows", Mr Carnell wrote in a note on Wednesday.
The People's Bank of China said in an online statement that the liquidity remained at relatively high levels after "countering reserves payment by financial institutions and maturing reverse repos".
The yuan closed at 6.7999, down 102 basis points from Monday.
The offshore yuan was trading 0.01 per cent firmer than the onshore spot at 6.7946 per USA dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.964, 2.47 per cent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.