The dollar hovered at six-week highs against a basket of its peers as fresh worries over U.S.-China trade tensions and global growth boosted appetite for safe-haven assets.
The key focus this week is the latest round of trade talks as U.S. negotiators prepare to press China on longstanding demands that it reforms how it treats American companies' intellectual property.
The bitter trade dispute between the world's two largest economies since April last year has weighed heavily on the yuan.
Together with China's economic slowdown, the double whammy of risks have dragged the yuan down by 5.3 percent against the dollar in 2018, following a rise of 6.8 percent a year earlier.
Stephen Chiu, FX and rates strategist at China Construction Bank (Asia) in Hong Kong, said a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping is unlikely to happen before the March 1 trade deadline.
"Therefore, if the upcoming high level trade negotiation fails to reach some practical agreements and save some time for a Trump-Xi meeting, risk-averse market sentiment will continue to deteriorate. And it will boost the dollar, especially USD/RMB," Chiu said, expecting both onshore and offshore yuan to trade in a range of 6.75 to 6.83 this week.
Prior to market opening on Monday, the People's Bank of China (PBOC) set the midpoint rate at 6.7495 per dollar, 414 pips or 0.61 percent weaker than the previous fix of 6.7081.
In the spot market, the onshore yuan followed the weakness in the official fixing. It opened at 6.7622 per dollar and was changing hands at 6.7781 by 0328 GMT, 441 pips weaker than the previous late session close and 0.42 percent softer than the midpoint.
Yuan traders said spot yuan was tracking its offshore counterpart and the global dollar index in morning trade.
But trading was light as many market participants and corporate clients have yet to return from the new year holiday.
Trading volume stood at $7.875 billion as of 0328 GMT, down from a normal half-day volume of around $15 billion.
A slew of economic data is due this week, including trade and inflation. And China' January loan growth data will be closely watched for any signs of slowdown in the world's second-largest economy. Economists expect the authorities to continue to spur commercial lenders to extend more credit to cash-strapped companies rather than cut benchmark rates as that could result
in further yuan weakness and spark capital outflows. New bank loans in China are expected to have surged to a one-year high in the first month of 2019, a Reuters poll showed.
The global dollar index rose to 96.667 as of 0328 GMT, from the previous close of 96.637. The offshore yuan was trading at 6.7857 per dollar as of 0328 GMT.