Despite strong gains in Asia and modest gains in Europe, a U.S. market rally prompted by movement in the Chinese yuan faltered on Monday.

The People's Bank of China said Saturday it would allow limited flexibility in the Chinese currency, which many analysts say is undervalued, keeping Chinese exports cheap overseas. The yuan had been pegged to the U.S. dollar since the beginning of the financial crisis in 2008.

It has further been reported that companies with a presence in China, such as Caterpillar Inc., expect to make gains if the yuan appreciates, but the firm followed the general trend, up 3.4 percent early and closing up only 0.33 percent.

The Dow Jones industrial average, by close, lost 8.23 points or 0.08 percent to 10,432.41. The Standard & Poor's 500 index fell 0.39 percent to 1,113.20. The Nasdaq composite index lost 20.71 or 0.9 percent to 2,289.09.

1,262 shares advanced and 1,782 declined on a volume of 4.5 billion shares traded, on the New York Stock Exchange.

The benchmark 10-year Treasury note fell 6/32 to yield 3.245 percent.

From Friday's $1.2374, the euro fell to $1.2317. The dollar, against the yen, rose to 91.06 yen from Friday's 90.74 yen.(With Inputs from Agencies)