China's yuan traded flat against the dollar on Monday, after the central bank set a weaker mid-point following a wild ride last week that saw the yuan strengthen around 1 per cent before falling back amid a liquidity squeeze in the offshore market.

Monday's official mid-point, guided by the People's Bank of China, was set at 6.9262 per dollar.

The fix was 594 pips, or 0.86 per cent, weaker than the reference rate on Friday, its biggest one-day percentage drop since June. Friday's fix was 6.8668 per dollar.

Still, Monday's fixing was firmer than the market had expected, traders said, with forecasts around 6.9450 per dollar.

Monday's midpoint fixing drew strong interest after the sharp movements last week, during which the offshore yuan had a record weekly rise.

"Today's fixing was so suppressed," said one trader at a foreign bank in Shanghai.

"There was some corporate dollar demand in the market, while some dollar sales emerged from speculative arbitrage," the trader added, noting the widened gap between onshore and offshore spot rates let some investors purchase dollars offshore to sell for a profit onshore.

Some traders said major state-owned banks were offering dollars in morning trade, but the amount was not as huge as at the end of 2016. State-owned banks have regularly sold dollars over the past few months in what traders believe is part of efforts to prevent the yuan from falling too rapidly after the currency tumbled to 8-1/2-year lows in November.

Last week, yuan overnight interbank rates in Hong Kong soared, pushing the offshore yuan to its strongest levels since January 2016 and creating a knock-on effect on the onshore yuan. Interbank rates for the offshore yuan fell sharply to 14.05 per cent on Monday, from Friday's 61.33 per cent.

The falling yuan has raised concern among Chinese policymakers of capital outflows, and on Saturday the government reported that foreign exchange reserves fell to near six-year lows by the end of December.

Reserves held just above the critical $US3 trillion level, however, after authorities stepped in to support the weakening yuan ahead of US President-elect Donald Trump's inauguration. "The spike of (the) fixing this morning together with the fall of December FX reserves to $US3.01 trillion implies that expectations on RMB depreciation may resume this week," Tommy Xie, an economist at OCBC Bank in Singapore wrote in a note on Monday.