The offshore yuan fell to 6.97 a dollar, refreshing its record lows, and touching the daily trading bottom at around 6.9741.

Traders said Chinese banks were trading the yuan at even lower prices. The plunge came after the Chinese central bank set the official yuan dollar pairing at 6.9495, down 33 pips from the previous fix.

The inter-bank Hibor rate surged to its highest level since mid September, indicating a tightened liquidity situation in Hong Kong's Ren Min Bi market. The hike of the Hibor is seen as a way to prevent shorting speculation on the yuan in the offshore market.