The yuan fell on Wednesday as a new U.S.-China trade war dented Chinese markets returning from an extended Lunar New Year break, while the yen jumped against the dollar as traders raised their bets on Bank of Japan rate hikes this year.

The offshore yuan extended losses with regional peers, as China and the US slapped tariffs on each others’ exports as the trade war came to life.Most Read from BloombergNew York’s First ‘Passive House

The yuan sank on Wednesday as a new Sino-U.S. trade war shook Chinese markets returning from an extended Lunar New Year break, while the yen jumped on rising bets of further Bank of Japan (BOJ) rate hikes this year.

Currency traders are waiting with bated breath for China’s next daily reference rate for the yuan, with some expecting authorities to relax their tight grip, if Donald Trump’s tariffs go into effect.

The yuan weakened on Wednesday as escalating U.S.-China trade tensions rattled Chinese markets post-Lunar New Year. The dollar surged over 0.5% against the yuan to 7.2856, despite the Peoples Bank of China (PBOC) setting

The U.S. dollar fell to its lowest in more than a week on Wednesday as investor nerves about a global trade war abated, while the Japanese yen rallied on the back of strong wage data.

China extended its support for the yuan by setting its daily reference rate for the managed currency at a level stronger than 7.2 per dollar, as escalating trade tensions with the US add to the depreciation pressure on the yuan.