Cryptocurrencies were volatile after suffering one of their biggest losses on Wednesday in the wake of China's decision to ban financial and payment institutions from providing digital currency services.
Analysts and traders also say that relatively tight cash conditions ahead of monthly tax payments due this week continue to provide some support for China's currency.
The auction in Hong Kong is aimed at improving the yuan yield curve in the financial hub, the People's Bank of China (PBOC) said in a statement on its website.
The volume-weighted average rate of the benchmark overnight repo traded in the interbank market, rose to 2.13% in morning trade, the highest level since April 30.
"The PBOC's Q1 monetary policy report suggests that the central bank is not worried about imported inflation, despite that it expects PPI to rise further in Q2 and Q3," said Frances Cheung, rates strategist at OCBC Bank in Singapore.
The yuan's weakness came after the global dollar index on Monday touched its weakest level since late February. It was little changed on Tuesday at 90.253.