I forgot to mention that there was previously a simple program loaded on the custom made PCB, that increments a variable and displays it on lcd. And that program still works ok.
I doubt whether the accuracy of the voltage detection circuitry on the MiniProg is any good. For practical purposes, it functions just to detect whether target voltage already exists to prevent double powering using the programmer.
Note that a voltage of ~ 2.3V is still above VIH for the MiniProg, which is probably why programming still works.
From the release notes on Miniprog3 -
Update to Improve Voltage Detection Capability
The CY8CKIT-002 MiniProg3 kit has been updated to improve the voltage detection capabilities.
The MiniProg3 correctly measures the target voltage within an accuracy of 20 mV for a range of
1.8 V - 5.0 V