The Australian dollar steadied on Monday as the People's Bank of China moved to stabilise its currency, but concerns around the impact of the renminbi's devaluation on the Australian economy might limit future gains.
In late trade on Monday the Australian dollar was buying US73.74&cent;, strengthening slightly from its US73.65&cent; open. In its daily morning "fix", China's central bank moved the midpoint from which its currency can deviate by just 0.1 per cent to 6.3969 yuan to the US dollar.
The move came almost a week after China stunned the markets by slashing its currency's valuation by 1.9 per cent and 1.6 per cent in two days, sending the dollar on a 1 per cent slide both days. 
UBS economist George Tharenou said China's move was a reaction to its sharply weaker economy.  He expected the Australian dollar to depreciate further, to US70&cent; by the end of 2015, as that weakness weighed on commodity prices and capital expenditure.
"If the Fed hikes were 'pushed out' it would raise the risk that [the Australian dollar] fails to sufficiently insulate Australia's economy from a weaker China, which could pressure the [Reserve Bank of Australia] to ease again," he said in a research note.
The release of inflation data on Wednesday night and the minutes from the Fed's   August monetary policy setting committee meeting are shaping as key events for the Australian unit this week.
Westpac senior currency strategist Sean Callow said China was already enjoying cheap commodity prices from Australia before the devaluation, because of its increasing supply. 

Rise in demand
Any improvement in Australia's exports would come from a rise in demand if China's housing and infrastructure picked up as the cheaper yuan stimulated the economy via increased exports, he said.
"As Australia and other countries continue to increase supply, the prices are going to continue to go down unless we can find greater demand from them," he said.
Goldman Sachs commodity analyst Christian Lelong said the impact on  iron ore miners would be muted because  they would  benefit in the short term from the foreign exchange tailwinds, including a lower Australian dollar. 
But coal would come under pressure as China's  coal exports became cheaper on a lower yuan and international competitors would need to lower their prices to stay competitive, Mr Lelong said. 
"Imported coal must be priced competitively against domestic coal, turning China into the global price setter." 
OzForex corporate dealer Matt Richardson said the fortunes of the Australian dollar lay with the US Federal Reserve. The Australian currency was finding support this week amid fears the yuan devaluation would have a deflationary effect on the US, in turn slowing the pace of its interest rate rises. 

Probability has decreased
"There is still a 50-50 expectation we will see a rate hike in   September, but that probability has decreased since Tuesday last week," Mr Richardson said. 
The dollar was hitting a resistance point at US74&cent; but any signal from the Fed of a slowdown in the trajectory of rate hikes could push the dollar towards US75&cent;, he said. 
Mr Richardson said the yuan could devalue 6 or 7 per cent further by the  end of 2015. It still looked overvalued because it had not been depreciated against the US dollar in the past 12 months compared to other major currencies, with the first US rate hike in almost a decade nearing.
Foreign exchange traders will digest the RBA's board meeting minutes on Tuesday for clues as to its interest rate strategy.