China's yuan falls below a key dollar level for the first time this year as the economy's rebound sputters

• The yuan fell bellow the critical 7-per-dollar threshold on Wednesday amid weak economic data.
• That's the first time this year that China's currency undercut that key psychological level.

The Chinese yuan weakened past the crucial level of 7 against the dollar for the first time this year as hopes for China's post-pandemic recovery continue to fade.

In offshore trading Wednesday, the yuan dipped as much as 0.3% to 7.0201 per dollar, and onshore trading saw it fall as much as 0.4% to 7.0026, according to Bloomberg data.

The yuan has fallen more than 4% against the dollar from a January high, when sentiment was still bullish after the country lifted its COVID restrictions last fall.

The currency's latest decline came after a fresh slate of economic data earlier this week pointed to weakness in manufacturing output, retail sales and fixed-asset investment.

The 7-per-dollar-level is often seen as one of psychological importance for the yuan and, though mostly arbitrary, a threshold Chinese authorities usually avoid crossing.

In previous situations where the yuan weakened past the threshold, China responded with sharp intervention. For instance, during a 2016 depreciation, the country spent over $107 billion in currency reserves to maintain renminbi strength.

For now, little action has been taken by the People's Bank of China. This may be as the central bank's Governor Yi Gang stated in March that the 7-per-dollar level was no longer of psychological importance, and later said the PBOC has largely loosened its control of the currency.

But the bank still determines the level at which onshore renminbi may move, allowing it to trade at 2% against the greenback's midpoint each day.

The yuan's slump also comes as China is placing increased effort on promoting the currency in global trade. But seeing the recent drop, exporters are holding onto their dollars, in case the yuan keeps falling, according to Bloomberg.