TOKYO: The dollar eased on Monday in the initial reaction to U.S. President Joe Biden's decision to end his reelection campaign, clearing the way for another Democrat to challenge Donald Trump.

China's yuan was largely unfazed by the central bank's decision to cut a key interest rate.

The U.S. currency slipped 0.08% to 157.38 yen early in the Asian day, while the euro gained 0.11% to $1.0895.

Biden announced he was exiting the race on Sunday, and endorsed Vice President Kamala Harris to replace him as the Democratic candidate in the November election.

Former President Trump, the Republican nominee, sits well ahead in betting markets following Biden's disatrous debate performance last month and a surge in questions about his mental competence.

Commonwealth Bank of Australia strategist Joseph Capurso warned it was too early to read too much in the dollar's reaction.

"The bottom line is what the polls show this week," Capurso said, explaining that a decline in odds for a Trump win should see the dollar weaken, and vice versa.

"Harris might be a stronger candidate, but is it enough to turn the polls?"

The British pound gained 0.15% to $1.2931.

The Australian dollar added 0.08% to $0.6691.

Meanwhile, the dollar was steady at 7.2881 yuan in offshore trading after the People's Bank of China cut the seven-day reverse repo rate to 1.7% from 1.8%, saying the move would improve open market operations and support the real economy.

(Reporting by Kevin Buckland; Editing by Lincoln Feast.)