Investing.com - The Chinese yuan was steadier against the dollar on Monday, easing fears that China could let the currency fall further after last week’s surprise devaluation rattled global markets.
On Monday the People’s Bank of China set the midpoint rate slightly firmer than at Friday’s close, easing fears that the currency is headed for a prolonged decline.
The yuan posted its largest ever weekly decline and fell to four-year lows after China’s central bank cut the fixing by 1.9% last Tuesday, the biggest drop since 1994.
The PBOC described the move as a “one-off depreciation”, based on a new way of managing the exchange rate that better reflected market forces.
The unexpected move sparked fears that China would continue allow the yuan to depreciate, which could trigger a global currency war.
China’s central bank said Thursday that there was no basis for further depreciation in the yuan, in a bid to reassure jittery global markets.
Last week's drop in the yuan could help to "sharply reduce the possibility" of similar adjustments in future Ma Jun, chief economist at the central bank said on Sunday.
Uncertainty over the impact of the devaluation on global inflation expectations and the outlook for growth in China have sparked fears that the Federal Reserve could keep short-term interest rates on hold for longer.
Investors were looking ahead to Wednesday’s minutes of the Fed’s July 28-29 meeting, which it was hoped would provide more clarity on its plans to hike short-term interest rates for the first time since 2006.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was little changed at 96.61.