Investors look at an electronic board showing stock information at a brokerage house in Shanghai, China June 20, 2018.
Speculation was rife the central bank in China was intervening in the currency market to staunch losses and prevent a potentially destabilising sell-off in the yuan.
Both the yuan and Chinese equity markets have been on edge ahead of July 6, when US tariffs on $34 billion worth of Chinese goods take effect.
The dollar was down 0.15 percent against a basket of six major currencies at 94.528 ahead of the US Independence Day holiday on Wednesday, after notching up three consecutive months of gains.
The dollar was down 0.1 percent versus the yen at 110.465 while the euro traded up 0.1 percent at $1.1664.
The Shanghai index dropped 2.5 percent on Monday and was down more than 1 percent on Tuesday morning.
But at the end of the day, WTI is heading higher after American Petroleum Institute (API) reported another massive draw of 4.5 million barrels o for the week ending June 29 but inventories at Cushing the delivery hub for NYMEX WTI fell 2.6 million barrels.
Chinese stocks were hit the most, with Hong Kong's Hang Seng index diving 3.3 per cent to its lowest level in 10 months, the Shanghai Composite Index shedding 1.9 per cent to hit a fresh 28 month low.
"There is undoubtedly cause for concern, but not alarm on the prospects for the Chinese yuan", Aninda Mitra, a senior analyst at BNY Mellon Investment Management in Singapore, said in a note Tuesday.
In flagging its first move, Washington said it would implement its tariffs on July 6, but the 12-hour time difference technically puts Beijing ahead in imposing its reciprocal measures.
In early trade on Tuesday, yuan weakened to a low of 6.7204 against the dollar, the lowest since August 7, 2017.
Thankfully for regional risk, the PBoC engaged the Yuan airbrake yesterday afternoon and at least for the time being, with the help of Chinese state-owned banks who were seen selling dollars to prop up the Chinese currency, is restoring a sense of calm in regional markets. Then spilt lower after Saudi Arabia said it's prepared to use its spare production capacity, estimated at 2million barrels per day, to balance the global oil market and all but confirming President Trump's weekend tweets that he asked Saudi Arabia to increase oil production.
Offshore yuan had dropped to an 11-month low of 6.7332 per dollar before recouping its losses to finish 0.33 per cent higher on Tuesday.
The yuan was last traded at 6.6960 per dollar. Beijing has promised to retaliate with tariffs on USA products.
The Reserve Bank of Australia (RBA) kept rates at a record low 1.5 per cent on Tuesday and showed no hint of raising them soon.
Officials in China, the epicenter of the global trade row, have warned the United States that the tit-for-tat tariffs on each others' goods will ultimately prove detrimental for American businesses and jobs.
The mood was more cheerful in Europe where a pan-European equity index rose 1 percent, the euro firmed and bond yields climbed after German Chancellor Angela Merkel struck a migration deal with her Bavarian conservative coalition partners.
But traders think the respite in the currency may only be temporary, and remain very bearish amid the trade tensions and waning Chinese growth momentum. -China trade tariffs, traders were more concerned about jettisoning risk which could have contributed to the amplified price action. Oil is one of Canada's major exports.