China's manufacturing data were disappointing, and Beijing will likely have to introduce fiscal stimulus and cut interest rates, says Commerzbank's Hao Zhou.
The British pound traded more than 1 percent lower after Mark Carney, the head of the Bank of England, made remarks about the U.K. economy following the Brexit vote.
The People's Bank of China will let the yuan further decline to the 6.8 level this year.
Asian markets closed higher on Monday, shrugging off Friday's global selloff sparked by the UK's unexpected vote to leave the EU.
China is stressing stability as it negotiates its economic transition and re-evaluates its relationship with Britain after the Brexit vote.
In the wake of a global selloff, Brexit could be changing the market narrative in a big way.
Asian stocks cratered, gold prices surged and the dollar briefly plunged below 100 against the yen on Friday as the Brexit vote rocked markets.
The Japanese yen surged and the Nikkei tumbled on Thursday after the Bank of Japan kept monetary policy steady as was widely expected.
Chinese markets rose on Wednesday despite MSCI delaying inclusion of mainland shares in a key index, while other Asia markets retraced losses.
China's stimulus is still coming through to stabilize growth momentum but underlying downwards pressure remain, says UBS Investment Bank's Tao Wang.
Commerzbank's Hao Zhou says China's inflation rates are still fairly soft and expects China's central bank to maintain an easing bias.
OCBC forecasts a weaker Chinese currency by year-end, saying that China's move to a basket-valuation has worked.
China's basket currency system provides greater communication to the market about where the yuan is heading, explains OCBC economist Tommy Xie.
Analysts at the firm say they have a bearish view on the yuan due to a 'weak link' in the mainland's currency management strategy.
Goldman Sachs blames its change in sentiment on a "weak link" in mainland China's currency management strategy.
News that Beijing will lift curbs on investments in service sectors, including e-commerce, logistics and accounting, is positive but won't be a game-changer, explains Adrian Mowat of J.P. Morgan.
Profits of China's industrial firms in April rose 4.2% from the same period last year to 502 billion yuan, the statistics bureau said on Friday.
Across Asian markets, the energy plays rose as oil hit the $50-a-barrel mark for the first time since November, but broader markets were mixed.
Increased defaults in China's corporate bond market - generally viewed as a positive - could send investors running for the hills, analysts warned.
The People's Bank of China cheapens the currency to its lowest level since 2011 as the dollar climbs.