SINGAPORE/SYDNEY: The safe haven yen shed Monday's earlier gains after China's central bank unveiled a fresh step to curb offshore speculation in the yuan and also set a firmer guidance rate, soothing worries about the risk of a rapid fall in the yuan.
The yuan's slide to a near-five year low earlier this month had stirred renewed concerns about China's economic health and the outlook for global growth, heightening investor risk aversion.
Such concerns about the yuan eased for now, as the People's Bank of China announced a new move to curb offshore speculation in the currency, and also set a firmer midpoint rate for the yuan on Monday.
The dollar edged up 0.1 percent to 117.24 yen, up from a session low of 116.56 yen touched in early Asian trade on Monday as well as Friday's 4-1/2 month low of 116.51 yen.
The Australian dollar, often used as a liquid proxy for China plays, rose 0.8 percent to $0.6914, pulling away from a near seven-year low of $0.6827 set on Friday.
Still, market participants remained sceptical about the prospects for a sustained improvement in risk appetites, given the selloff in global equities seen so far in January.
"I think we will continue to see demand for yen in the short term," said Jesper Bargmann, head of trading for Nordea Bank in Singapore. "I think the market is nervous and we will see further risk aversion."
Sterling remained on the defensive, dented by worries about Britain's economic outlook and jitters over a looming referendum on British membership in the European Union.
On Monday, sterling touched a low of $1.4251, just below Friday's trough and setting a fresh 5-1/2 year low. Sterling was last up 0.1 percent at $1.4273.
The euro eased 0.2 percent against the dollar to $1.0892 .
CANADIAN DOLLAR
Earlier on Monday, investors took aim at the Canadian dollar, driving it to a near 13-year low of C$1.4650 against the US dollar on growing expectations the Bank of Canada will cut interest rates as early as this week.
The outlook for commodity currencies, particularly the loonie, remained bleak given expectations for further weakness in oil prices.
Oil prices hit their lowest since 2003 on Monday, as the market braced for a jump in Iranian exports after the lifting of sanctions against the country at the weekend.
"Sustained weakness in the price of oil continues to weigh on the Canadian economy. The BoC would need to cut at least 50 bp this year to partially counteract the continued slide in crude oil prices," analysts at Barclays wrote in a note to clients.
US stock exchanges will be closed on Monday in observance of Martin Luther King Jr. Day. On Tuesday, China is set to report its weakest full-year growth figure in 25 years on the back of slowing output and sagging investments.
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