The yuan weakened to its lowest level against the dollar this year, with the onshore spot trading price falling to 6.7167 in the morning before rebounding to 6.6492 by 5 pm.
There had also been reports of suspected intervention, with some major Chinese banks selling the dollar after the yuan slid past 6.70 per dollar in the swaps market. The Chinese currency's downturn comes ahead of July 6, when United States tariffs on $34 billion worth of Chinese goods are to kick in. Retail stocks were down 3.58 percent, with Fast Retailing lower by 2.87 percent.
Trump told the World Trade Organization on Monday that "we'll be doing something" if the United States is not treated properly, just hours after the European Union said that USA automotive tariffs would hurt its own vehicle industry and prompt retaliation.
The benchmark share index in Shanghai, which entered a bear market last week, is trading near its lowest level in more than two years.
The Shenzhen Component Index closed 0.45 percent higher at 9,221.54 points.
The Chinese yuan surged against the dollar on Wednesday, continuing a recovery that began the previous afternoon after China's central bank chief pledged to keep the exchange rate "basically stable". It sharply depreciated by 3.3 percent in June, the largest monthly drop ever.
The dollar retreated 0.4 percent against a basket of currencies and the easing tensions in Germany helped the euro to gain 0.2 percent against the greenback. "The euro/dollar is misleading and it looks like nothing is happening", she said, adding that the market needed to see data on whether the trade dispute was so far having an impact on the real economy. He said that the bank is closely watching the foreign exchange market's recent fluctuations due to a strengthening dollar and external uncertainties.
On equity markets, Hong Kong dived as much as 3.3 per cent at one point to nine-month lows, hit also by a USA move to block China Mobile from offering services to the U.S. market.
The euro last traded at $1.1650, after shedding 0.45 percent overnight. The yen gained 0.2 percent versus the dollar to 110.39, supported by its safe haven status.
Stock markets in Europe and the United States advanced on Thursday, offsetting more losses in Asia as investors were encouraged by economic data from Germany and a report that its big carmakers could be spared from USA tariffs.
Fears over a slowdown in the country's economy and the start of a trade war with the United States have been weighing on Chinese shares and the yuan.
Shares of Mercedes-maker Daimler, BMW, Porsche and Volkswagen surged as much as 5 percent after reports of a USA offer to suspend tariff threats on EU-made cars if the bloc lifts duties on US vehicles.
USA crude oil futures climbed above the $75 mark for the first time in 3-1/2 years overnight and hovered near that level on Wednesday.