(Reuters) -- Asian shares fell Monday as Chinese stocks extended last week's sharp losses, while the yuan bounced in volatile trade hours ahead of an IMF decision on whether to promote it to a basket of global reserve currencies. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7 percent, and was on course to log a loss of about 2.7 percent for the month of November, after making its first gains in six months in October.
Japan's Nikkei dropped 0.4 percent, though it still looked set for a monthly gain of more than 3 percent.
Mainland Chinese shares opened slightly higher but then sank 1.7 percent, after posting their biggest one-day drops in more than three months on Friday.
Market sentiment remained shaky due to the resumption of IPOs, renewed efforts by the securities regulator to clamp down on leveraged buying and concerns about the cooling economy.
"At the heart of the issue, I think, would be worries that the authorities might be starting to fade out various stock price-supporting measures they had started in July," said Naoki Tashiro, the president of TS China Research.
The yuan bounced back in a volatile trade on the day when the International Monetary Fund is expected to add the currency to its benchmark currency basket on Monday.
Though analysts do not expect short-term impact, some analysts believe Beijing may allow the yuan to depreciate soon after its admission and may feel less pressure to push through promised reforms.
In onshore trade, the yuan fell to a three-month low of 6.3918 to the dollar before bouncing back to 6.3962, almost flat from Friday.
But in more volatile offshore trading, the yuan fell to a 2-1/2-month lows of 6.4591 to the dollar before rising back to 6.4354, up 0.2 percent on the day.
The board of the International Monetary Fund is widely expected to include the yuan in its Special Drawing Rights (SDR) basket at a meeting later in the day. Some traders expect Beijing may allow the yuan to depreciate after being admitted to the SDR basket, partly to reflect China's slowing economic growth, and may feel less urgency to push through further reforms.
Investors are also focusing on the European Central Bank's policy decision on Thursday, with growing expectations that it could cut interest rates by 20 basis points.
The euro traded at $1.0583, down 0.1 percent on Monday and 3.8 percent on the month, edging near a seven-month low of $1.0565 touched on Wednesday.
"I think markets have almost priced in the ECB's rate cut, and like after its easing in March, the euro is likely to rebound rather than heading towards parity against the dollar," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.
The prospects of an ECB easing also is putting pressure on the central bank of Switzerland, surrounded by eurozone countries, to take similar actions to stem any strengthening in the Swiss franc.
That pushed the franc to a five-year low of 1.0328 franc to the dollar on Friday. It last stood at 1.0311.
In contrast, the dollar is supported as the Federal Reserve is widely tipped to hike U.S. interest rates at its mid-December policy meeting. The dollar index rose to an eight-month high of 100.23.
The yen stood little changed 122.73 yen, showing little reaction after data showed Japan's industrial output rose slightly less than expected in October.
In commodities, gold licked wounds after Friday's 2 percent fall that took it to a near six-year low. The yellow metal logged its sixth straight weekly decline on a firm U.S. dollar and prospects of a U.S. interest rate rise next month.
Gold fetched $1,055.50 per ounce, just above Friday's low of $1,053.50.
Oil prices were also lethargic after falling on Friday. Global benchmark Brent futures LCOc1 dipped 0.1 percent to $44.80 per barrel.