Big Chinese state-owned banks kept the yuan in check, a day after its biggest rise since the currency was revalued in 2005, and the Foreign Ministry said change would be gradual, indicating the yuan's appreciation will be far slower than the pace demanded by critics in the West.

The two-way movement in the yuan is not great by the standard of freely floated currencies but is rare in China, where until this week the central bank had squashed intraday volatility via intervention on most trading days.

China started to relax its control over the yuan ahead of this weekend's G20 summit of world leaders in Canada, easing a two-year dollar peg that had been a lightning rod for critics who say the currency is undervalued and gives Chinese exporters an unfair trade advantage.

Weak May US housing data undercut stocks and sent US Treasuries up, while Europe grappled with a fresh tremor to its banking system after Fitch downgraded French bank BNP Paribas.

The downgrade hit Europe's banking stocks, leading to the end of a nine-day rally, and pushed prices for gold higher on safe-haven flows.

US crude oil futures were little changed at midday, trading just below $78 a barrel after edging lower in choppy trading, curbed by a stronger greenback and lowered expectations about a demand boost in China brought by its move toward currency flexibility.

Benchmark US stock indexes seesawed in and out of positive territory. In midday New York trade the Dow Jones Industrial Average slipped 6.05 points, or 0.06 percent, to 10,436.36. The Standard & Poor's 500 Index dipped 1.84 points, or 0.17 percent, at 1,111.36.

Rising technology shares helped keep the Nasdaq Composite Index up 9.66 points, or 0.42 percent, at 2,298.75.

MSCI's all-country world index fell 0.44 percent, looking set for its first loss since June 7.

European shares lost ground, with the FTSEurofirst 300 falling 0.43 percent to 1,050.79.

Earlier, Japan's Nikkei slid 1.2 percent to close at 10,112.89, a day after bouncing to a one-month high.