After strengthening over the past few months, the offshore yuan has finally weakened more than 0.6% against the greenback, to 6.7332 against the dollar.
Amid such compounding narratives, the Trump Administration had called on the US Congress on Sunday in order to pass a downsized pandemic relief bill, which was developed by capitalizing on a surplus of an expired small-loan business.
Prospects for a quick end to the stalemate over a new stimulus faded Monday with members of the House being told not to expect any action this week and many Senate Republicans rejecting the White House proposal for a deal.
A recovering economy, a hefty yield premium in sovereign debt over Treasuries and the prospect of a United States presidential victory by Democrat nominee Joe Biden are all providing tailwinds.
More stimulus is seen as negative for the dollar.
The People's Bank of China held a lottery over the weekend to distribute 10 million yuan ($1.5 million) worth of its new digital currency to 50,000 people in Shenzhen.
The Australian dollar fell about 0.5% on Tuesday after reports that China has halted coal imports from the country as their relations deteriorate while the US dollar recovered from a three-week low plumbed the day before.
The yuan surged about 1.6 per cent on Friday when the currency traded for the first time this month following National Day holidays.
USA stocks climbed on Monday as investors looked to Washington to unveil more fiscal stimulus to aid the economy and hoped that Wall Street's largest banks would post decent quarterly earnings later this week.
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The lottery's very nature leads the experts to believe that this is a test study for the upcoming digital yuan launch.
"The authorities have not stood in the way of yuan strength, but this move could be seen as a sign that they want to slow the pace of appreciation", said ANZ Bank's head of Asia research, Khoon Goh.
Despite its strong progress, China was notably not a participant in the report.
Other currency moves were modest, with early dollar weakness paring a bit.
The euro fell 0.2% to $1.1806. The kiwi dipped 0.1% with the softer yuan to sit at $0.6661.
Meanwhile, U.S. markets are also gearing up for the third-quarter earnings season, where the S&P 500 companies are expected to report 21% drop in earnings, according to Refinitiv data.
The S&P 500 rose 36 points, or 1.05%, to 3,513.26, while the Dow Jones Industrial Average rose 179 points, or 0.63%, to 28,763.12.
Gold held steep Friday gains at $1,929 an ounce as investors stuck with bets that US stimulus would eventually arrive and drive inflation to the benefit of bullion.