The Chinese yuan has been steadily weakening against the U.S. dollar since the National Day weeklong holiday in early October, slipping below the psychological benchmark of 6.7 and hitting a central parity rate of 6.78 on Friday.

The People's Bank of China (PBOC) responded to this slippage by shifting its stance on exchange rate controls. As a result, the PBOC no longer seems to regard a dollar-yuan rate between 6.7 and 6.75 as an uncrossable barrier, and may instead usher in what some have called an "orderly devaluation."

The central bank was clearly defending the currency between July and September. A series of political events — the G20 Finance Ministers and Central Bank Governors Meeting in Chengdu; the Hangzhou G20 summit; and the inclusion of the yuan in the International Monetary Fund's Special Drawing Rights basket of currencies — made maintaining a stable currency a must-do for the central bank.

A stable dollar-yuan exchange rate, however, would have a negative impact on China's exports. The yuan's effective exchange rate against the dollar is still strong relative to other currencies in the PBOC's central parity basket. And against the backdrop of sluggish global demand, a depreciation of the yuan's nominally effective exchange rate may not directly drive exports higher. But due to international competition and protectionism in some countries, appreciation would further weaken demand for China's exports.

As a result, stabilizing the dollar-yuan exchange rate would conflict with the targets set by the Chinese government aimed at encouraging stable economic growth.

In addition, there's no need to subject the yuan to competitive devaluation. Indeed, since the Brexit decision in Britain, PBOC efforts to stabilize the yuan have been acknowledged by the international community. On Oct. 15, the U.S. Treasury Department declined to label China a "currency manipulator," noting China took action to maintain the yuan exchange rate and thus prevent a rapid devaluation of the currency.

Taking into account the forces driving what's been a strengthening of the dollar, we foresee the following outlook for the yuan-dollar exchange rate, based in part on the Chinese government's commitment to letting the yuan devalue at a steady pace:

First, the pace of any interest rate hikes by the U.S. Federal Reserve is likely to be slow. The current postponing of an interest rate hike will have less of an impact on the Fed's USD Index than last year's rate increase. Meanwhile, questions about the sustainability of the U.S. economic recovery have made further breakthroughs for the USD Index hard to expect.

Second, drastic foreign-exchange market volatility will drive demand for the Japanese yen as a safe-haven currency. Current uncertainties stemming from the recent European banking crisis and Brexit could lead to "black swan" incidents on the foreign exchange market. If these incidents occur, yen demand will increase substantially, thus preventing an increase in the USD Index.

Third, most Chinese companies that borrowed through global, dollar-denominated debt markets will quickly repay these loans and bonds. These companies have been planning to accelerate repayments for all dollar-denominated loans and bonds ever since an Aug. 11, 2015, reform of the Chinese exchange rate turned market consensus in favor of yuan depreciation.

How China's yuan exchange rate reform should proceed is a question with no simple answers. Some argue the rate should be equally responsive to economic and financial data — including major events — rather than merely react to changing dollar values. They think more reforms are coming, and that the yuan's value may further decline.

It's worth emphasizing, however, that the PBOC "orderly depreciation" goal has not changed. Given the volatile and complex nature of the international market, there's no need for a rush to devalue the yuan. But we expect more steps to be taken in terms of exchange rate reform next year, after yuan depreciation pressure has fully eased. The result will be a yuan that's more easily convertible worldwide.

Zhong Zhengsheng is the head of macro and policy at CEBM Group, a subsidiary of Caixin Insight Group; Zhang Lu is a macro analyst at CEBM Group