The marginal rise in Chinese currency Yuan on Monday is believed to be the extended support by the central bank of the world's second largest economy.

The state-owned banks were supporting the Chinese currency in the foreign exchange (forex) market though not officially, according to the market circles. Yuan is likely to record 2.7 percent drop during August.

An analyst at an Asian bank located in Shanghai observed that there was good chunk of buying from state-owned banks this morning in support of Chinese currency.

Chinese Yuan (CNY) was trading against US dollar at 6.3893 before opening the market and later it strengthened marginally by 0.15 percent to 6.3986. The midpoint rate CNY=SAEC (State Administration of Exchange Control) was at 6.3893 per US dollar. 

People's Bank of China (PBOC) set this mid-point rate for CNY against the US dollar. In the spot market, CNY opened at 6.3893 per dollar and reached to 6.3805 in afternoon trade registering a rise of 0.13 percent from its previous close.

Considering the midpoint rate, however, the Chinese currency is set for 2.7 percent depreciation for August month.  

China devalued its currency on 11 August 2015 and this sent tremors across the financial markets globally. This is most probably sparking off a currency war among the emerging markets economies, feel the analysts.

The Chinese government has also sent indications that there wouldn't be any basis or support to its depreciation or free fall after devaluation. The PBOC strongly feels that its currency Yuan is likely to stay at a reasonable level even in free float trading. 

The offshore Yuan against the US dollar was trading 1.03 percent lower than onshore spot at 6.4469 on Monday. 

Other major Asian currencies that weakened include India's rupee 3.2 percent, Thailand's baht 2.5 percent, Philippine peso fell 2.2 percent. Taiwan's currency too fell 2.2 percent. 

South Korea's won fell 1.1 percent in August month with this it dropped for a consecutive fourth month.  Malaysia's ringgit suffered the most among the Asian currencies as it fell 8.7 percent in August indicating its worst downfall since 1998. Indonesia's rupiah fell 3.7 percent. 

Led by Chinese currency Yuan, the majority of Asian currencies turned weaker in the global foreign exchange markets. The new uncertainty is posing a major challenge to Asian economies. Chinese currency Yuan is set for more volatility in the days to come, forecast analysts.

Chinese currency already dropped 2.7 percent during August. Yuan's volatility rose by four times after shifting to more market-determined free-float trading.