China's yuan rose on Monday morning after the central bank set a stronger midpoint setting but the gains were erased in the afternoon as the market weighed comments by an adviser to the People's Bank of China on the currency's longer-term level. Sheng Songcheng said over the weekend that the yuan had strengthened recently on the back of dollar weakness and rising interest rates in China's financial markets, but these factors would recede, and the yuan will likely stabilize to around 6.6 against the greenback in the longer-term.

Prior to market opening on Monday, the PBOC set the midpoint rate at 6.4832 per dollar, firmer than the previous fix of 6.4915. In the spot market, the yuan rose to as much as 6.4760 against the dollar, before pulling back to 6.4869 at 0700 GMT.

The global dollar index rose to 92.127 from the previous close of 91.949. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.6195, 2.06 percent away from the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.

Copyright Reuters, 2018