After China’s central bank set a stronger guidance rate for the Yuan on Monday, the safe haven Yen eased against the dollar, casting away fears that Beijing is trying to weaken its currency to gain a competitive export advantage.

China’s Yuan has been weakening for eight consecutive sessions; it firmed on Monday after the central bank set the daily midpoint rate higher for a second day.

For now, the higher guidance rate helped calm market fears that Beijing may want to engineer a sharper devaluation, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
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.

Risk appetite was hit globally last week, benefitting the Yen, after China guided the Yuan sharply lower, raising concerns about the health of the world’s second-largest economy and the outlook for global growth.
The dollar held steady against the yen at 117.25 yen. Earlier, the dollar had touched a low of 116.70 yen, its lowest level since late August.

The Australian dollar, often used as a liquid proxy for China plays, was steady at $0.6956, up from a four-month low of $0.6927 set earlier on Monday.

Against the yen, the Aussie eased 0.1 percent to 81.50 Yen . It fell to 80.84 yen earlier, the Aussie’s lowest level against the yen since October 2012.

The euro eased 0.1 percent to $1.0915, but held well above Friday’s low of $1.0803.

Japan’s financial markets were closed for a public holiday, resulting in thinner trade than usual.