* Yen eases after PBOC sets stronger yuan guidance rate
* Worries linger over further yuan weakness
* Dollar up 0.4 percent vs euro (Updates after start of European trade)
By Patrick Graham
LONDON, Jan 11 (Reuters) - China's yuan again dominated moves on major foreign exchange markets on Monday, driven 1 percent higher against the dollar in offshore trade after reports of another round of aggressive intervention by Beijing.
With Chinese stocks sinking a further 5 percent, global financial markets were struggling to shake off the jitters from last week's fall in the yuan.
The dollar was higher against the euro while the yen hit five-month highs in Asian trade only to retreat after the People's Bank of China (PBOC) made moves in Hong Kong markets to support the yuan.
The Australian dollar, the main proxy for Chinese sentiment in the G10 list of major developed world currencies, recovered from a four-month low to stand 0.3 percent higher at $0.6977 AUD=D4 .
"The Chinese authorities clearly want to signal that it will not be a one-way trade in the renminbi," London-based Rabobank currency strategist Jane Foley said.
"But most people would recognise that were you to take away the interventions it is a currency that would fall."
The tightly controlled onshore rate for the yuan was around 0.2 percent stronger at 6.5807 per dollar CNY= after the PBOC set its daily mid-point rate higher for a second day. Offshore rates strengthened by 1 percent to 6.6180. CNH= Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said that the higher guidance rate had for now helped to calm market fears that Beijing may want to engineer a sharper devaluation.
But concerns over China's foreign exchange policy lingered, he added.
"We don't know what will happen tomorrow. If the guidance rate is set lower tomorrow, we could see the same thing as we saw before," Okagawa said.
The dollar built on its gains against the yen in early European trade, up 0.3 percent at 117.68 yen JPY= . Earlier on Monday it touched a low of 116.70 yen, the lowest since late August.
The euro eased 0.4 percent to $1.0882 EUR= , still above Friday's low of $1.0803.
Japan's financial markets were closed for a public holiday, resulting in thinner trade than usual.