The central bank trimmed the interest rate on medium term loans by 10 basis points, potentially paving way for a cut on the benchmark loan prime rate this Thursday.
On Sunday, China's Finance Minister Liu Kun said the government would roll out targeted and phased tax and fee cuts.
While lower interest rates often weaken currencies, the yuan shrugged off that bearish effect as cheaper borrowing could cushion China's economy against a more severe economic slowdown, analysts said.
The onshore yuan rose 0.17pc to 6.9760 per dollar by midday, while the offshore yuan was trading 0.21pc stronger at 6.9781.
The People's Bank of China set the onshore midpoint before the open at 6.9795, little changed and close to the Reuters estimate of 6.9796.
"Dollar/yuan is likely to trade lower towards 6.90 with China's coronavirus outbreak showing signs of stabilization and improvement," Scotiabank's analyst said in a note on Monday.
The number of reported new cases of coronavirus in China's Hubei province ticked up on Monday. But the province recorded a fall in new cases in the previous two days.
Analysts believe the virus which has killed 1,700 people and infected 70,548 in the country will dent economic growth. Early signs of stress are surfacing, with new home prices growing at their weakest pace in nearly two years.
The government enforced strict quarantines and extended the week-long Lunar New Year Holiday last month.
Traders said the yuan will likely trade in a tight range near its current level if the epidemic stabilises.
One trader in Shanghai noted that the slow return of the workforce is denting demand from corporate clients, capping trading volume and volatility in yuan markets.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.48, slightly firmer than the previous day's 93.34.
The global dollar index edged down to 99.117 from the previous close of 99.124.