Asian stocks fell on Monday and China’s yuan hit fresh 4-1/2 year lows as plunging oil prices added to investors’ nervousness about riskier assets ahead of an expected U.S. rate rise by the Federal Reserve later in the week.

The People’s Bank of China (PBOC) on Monday continued guiding the currency lower, setting the yuan/dollar official midpoint at its weakest since July 2011.

China decision to loosen its grip on the yuan and allow slow but steady depreciation in recent weeks had added to concerns that the world’s second-biggest economy may be more fragile than expected.

The PBOC said late Friday it has begun publishing a yuan index rate against a basket of currencies, seen by some as a green-light for more devaluation which could in turn pressure other emerging Asian currencies.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS hit a 2-1/2-month low and was last down 1.4 percent.

Japan’s Nikkei .N225 slumped more than 3 percent in early trade and was down 2.4 percent by late morning as falling commodity prices hit shares of energy companies and trading houses.

South Korea’s Kospi .KS11 retreated 1 percent. Australian shares dropped 1 percent and Shanghai stocks .SSEC dipped 0.2 percent.

For now, investors looked past better-than-expected Chinese indicators released over the weekend.

Data on Saturday showed factory output growth in China accelerated to a 5-month high in November, while retail sales rose at an annual 11.2 percent pace – the strongest this year. ECONCN

On Friday, the Dow .DJI sank 1.8 percent and the S&P 500 .SPX lost 1.9 percent as plunging crude prices added to fears of a possible spike in volatility if the Federal Reserve raises interest rates on Wednesday for the first time in nearly a decade, as widely expected.

“It’s fair to say that equities are going to be truly tested over the coming four days, and the Fed will be a catalyst for volatility in the lead up to Thursday,” wrote Evan Lucas, market strategist at IG in Melbourne.

A U.S. rate hike would be a first step toward normalizing monetary conditions after an extended period of loose policy, which had helped shore up riskier assets.

Oil prices continued their freefall after the International Energy Agency (IEA) warned that global oversupply of crude could worsen next year.

U.S. crude CLc1 was down 0.8 percent at $35.32 a barrel after touching $35.16 on Friday, the lowest since February 2009. Brent crude LCOc1 fell below $38 a barrel for the first time in seven years Friday and was last down 0.5 percent at $37.75.

In currencies, the dollar was little changed at 120.97 yen JPY= after shedding 0.5 percent on Friday, when it stooped to a near 6-week low of 120.585. The euro was steady at $1.0972 EUR= after gaining about 0.4 percent on Friday.

The greenback was hurt as long-dated U.S. Treasury yields slumped to multi-week lows on Friday as the continuing decline in crude prices and weak equities drove investors to safe-haven government debt.

The forex market is also keeping an eye on the Chinese currency after Beijing surprised some by appearing to shift the management of the yuan, or renminbi, toward a trade-weighted, currency basket basis instead of exclusively tracking the U.S. dollar.

China late on Friday launched a new trade-weighted yuan exchange rate index, saying it was intended to discourage investors from exclusively tracking the currency’s fluctuations against the greenback.

“While some will see this as cover for currency devaluation, we suspect the goal is to keep the renminbi’s value broadly stable rather than be compelled to have it follow the dollar higher, as it has over the past couple of years,” Capital Economics said in a note.

“But the haphazard way in which information is dribbling out is doing nothing to generate confidence.”

Spot yuan CNY=CFXS fell to 6.4647 to the dollar, down about 0.2 percent from Friday’s close and taking its losses far this year to just over 4 percent.

The Australian dollar, often used as a proxy for China-related trades, touched a 3-week low of $0.7160 after initially rising to $0.7218 in response to the upbeat China data released over the weekend.