SHANGHAI: China's yuan rebounded on Monday from a more than one-week low against the dollar hit the previous session, as prospects for an earlier rise in US interest rates softened.

But gains in the yuan were capped as investors became wary that its strength against a basket of currencies of its trading partners could prompt the central bank to roll out measures to curb further gains.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.4695 per dollar, 17 pips firmer than the previous fix of 6.4712.

In the spot market, onshore yuan opened at 6.4695 per dollar and was changing hands at 6.4628 at midday, 92 pips firmer than the previous late session close on Friday.

Some investors became cautious and refrained from betting on further strength in the Chinese currency.

The yuan's performance against its rivals, as measured by the China Foreign Exchange Trade System (CFETS) index continued to hover around 98, a level many see as the ceiling for the index.

A strong yuan will be a disadvantage for China's exports.

Li Liuyang, chief currency analyst at China Merchants Bank, attributed the stronger CFETS index to relatively smaller declines in the yuan than in other non-dollar currencies.

The CFETS index stood at 97.99 on Monday, down from Friday's 98.21, according to Reuters calculations based on official data.

Several traders said markets will shift their focus to minutes from the Federal Reserve's June meeting due on Wednesday for clues on policymakers' thinking over the timing to pare back stimulus.

Carie Li, economist at OCBC Wing Hang Bank, said the dollar could remain as the key factor influencing the yuan's movements.

"Unless the US dollar rises sharply, the USD/CNY may continue to fluctuate in the range of 6.45 to 6.50," she said in a note.

By midday, the global dollar index stood at 92.342, while the offshore yuan was trading at 6.4649 per dollar.