After falling around 0.8 percent against the dollar early on Tuesday, the yuan recouped its losses in afternoon trading, moving into positive territory.
There had also been reports of suspected intervention, with some major Chinese banks selling the dollar after the yuan slid past 6.70 per dollar in the swaps market.
The US and China are embroiled in trade dispute which will see US tariffs on US$34 billion of Chinese goods come into effect on Friday.
The Hang Seng then edged back to end 1.4 percent lower.
"We think the latest developments go in line with our view that Lopez Obrador will be more pragmatic than some domestic market participants expect", said Tania Escobedo, New York-based Latam FX Strategist at RBC Capital Markets.
Qi Gao, emerging market Asia currency strategist at Scotiabank, said that while the yuan may consolidate at its current level before July 6, it will remain susceptible to the headlines and is unlikely to rebound markedly. Traders and economists say major state-owned banks sometimes act on behalf of the central bank in the foreign exchange interbank market.
The yuan was last traded at 6.6960 per dollar.
The US Commerce Department on Monday added to the standoff by recommending against the approval of China Mobile's seven-year-old application to enter the US market, citing national security concerns.
MSCI's gauge of stocks across the globe gained 0.23 percent. President Donald Trump had also threatened on Monday to "do something" if the United States was not better treated by the World Trade Organisation.
The euro held up against the dollar after German Chancellor Angela Merkel reached a compromise deal on immigration with her coalition partners, keeping her government intact for now and averting a crisis in Europe's biggest economy. USA crude fell 1.5 percent to $73.03 per barrel and Brent was last at $77.71, down 0.68 percent.
The dollar last stood at 110.97 yen, giving up gains following sharp falls in Chinese shares. Japan's Nikkei edged to a near three-month closing low.
On the back of the force majeure in Libya and the supply outages in Canada the markets are staggering tight over the short run, and despite suggestions of more supplies coming to market, traders continue to buy dips as increased barrels may only act to prevent a more rapid increase in prices given the global economies insatiable demand for oil.
RBA Governor Philip Lowe said "one uncertainty regarding the global outlook stems from the direction of worldwide trade policy in the United States", cautioning that the recent U.S.
The lead from Wall Street is negative as stocks failed to sustain an early upward move in Tuesday's abbreviated session, finishing in the red ahead of the July 4 holiday.
USA crude oil futures settled 0.3 percent higher at $74.14 a barrel after rising above the $75 mark for the first time in 3-1/2 years.