(Bloomberg) — The onshore yuan weakened past a level that China had been defending since late last year, opening up room for the managed currency to slump further amid a sluggish economy.

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The yuan fell to breach the psychological milestone of 7.3 per dollar for the first time since late 2023, amid concerns over China’s economic struggles and the nation’s widening yield discount to the US. The currency slumped even after the central bank maintained its support for the currency with its daily reference rate on Friday.

The move is significant as it can be seen as a sign that the People’s Bank of China is relenting to mounting economic pressures and green-lighting weakness in its currency. Since late 2024, Beijing had put a floor under the yuan with stronger-than-expected daily reference rates and state banks’ heavy selling of the greenback.

The break of 7.3 “in a way is inevitable with continued dollar strength and the relentless fall in domestic government bond yield,” said Wee Khoon Chong, senior APAC market strategist at BNY. “Risk for dollar-yuan remains on the upside.”

The onshore yuan slid as much as 0.3% to 7.3174 before paring losses. In overseas trading, the currency dropped 0.1%.

The absence of a year-end seasonal rebound has added to the pressure on the yuan that was also weighed by President-elect Donald Trump’s threats of higher tariffs. To support the yuan, the PBOC has been setting its fixing — which confines the currency’s trading onshore to a 2% range on either side — at levels stronger than 7.2 for months.

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