China's central bank allowed the yuan to sink below an exchange rate of seven to the dollar. The level has no economic significance but might fuel trade tension with Washington, which complains a weak currency swells Chinese exports and hurts foreign competitors.
The People's Bank of China blamed the decline on "trade protectionism," a reference to Trump's tariff hikes in a fight over Beijing's trade surplus and technology policies. "Markets will brace for trade tensions to boil," said Vishnua Varathan of Mizuho Bank in a report.
Tokyo's Nikkei 225 fell to 20,590.87 and Hong Kong's Hang Seng fell to 26,267.22. Seoul's Kospi was 2% lower at 1,956.57. The Shanghai Composite Index dropped 0.4% to 2,856.40 and Sydney's S&P-ASX 200 retreated 1.3% to 6,684.40. New Zealand, Taiwan and Southeast Asian markets declined.
Traders also were watching Hong Kong, one of the biggest global trading centers, where protesters called for a general strike Monday over complaints about a proposed extradition law and other grievances.
The protests disrupted airlines flights and analysts warned trucking and cargo-handling also might be affected. On Wall Street, the benchmark Standard & Poor's 500 index lost 0.7% on Friday to 26,485.01. The Dow Jones Industrial Average dropped 0.4% to 26,485.01. The Nasdaq composite lost 1.3% to 8,004.07.
Despite the weekly loss, the major indexes are all up solidly this year, led by the Nasdaq's 20.6% gain. The S&P 500 is up nearly 17%. The concerns about the trade war and Fed have also blotted out what has been a better-than-expected U.S. earnings season. Earnings for S&P 500 companies are on pace for a drop of 1% from a year ago, better than the 3% that analysts had expected.
U.S. employment data released Friday were in line with expectations but Trump's threat Thursday of new tariff hikes on Chinese goods "renders backward-looking data comfort irrelevant," said Varathan of Mizuho Bank.
ENERGY: Benchmark U.S. crude lost 45 cents to $55.21 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.71 on Thursday to close at $56.66. Brent crude, used to price international oils, shed 54 cents to $61.35 in London. It gained $1.39 the previous session $61.89.
CURRENCY: The dollar dropped to 105.97 yen from Friday's 106.59 yen. The euro gained to $1.1125 from $1.1109.