Yuan headed for biggest single-day loss since 2008

The Chinese yuan fell sharply against the U.S. dollar on Tuesday as tight onshore liquidity conditions fueled rising expectations of further monetary easing, according to analysts.

The currency, which is still tightly controlled by the Chinese central bank, declined 0.5 percent to 6.203, putting it on track for its biggest single-day decline since 2008.

"Despite the recent interest rate cut, domestic liquidity has tightened," Nizam Idris, head of strategy, fixed income and currencies at Macquarie told CNBC, noting that short-term interest rates in China have risen sharply in recent days.

Read more: The People's Bank of China rate cut the 12-month benchmark lending rate by 0.40 percentage points to 5.6 percent on November 21.