(Bloomberg) -- The onshore yuan sank to its weakest level in five months, as an escalating China-U.S. trade spat hurt investors’ confidence in the currency.

The exchange rate fell 0.16 percent to 6.4474 per dollar, its lowest level since mid-January, as of 12:48 p.m. in Shanghai. That expands the yuan’s discount to the central bank’s daily fixing to a level that’s close to the widest since February, reflecting bearish sentiment.

The weakness came as a trade dispute between the world’s two biggest economies worsened, with China vowing to retaliate against U.S. companies after President Donald Trump threatened to place more tariffs on Chinese imports. The nation’s stocks slumped Tuesday.

"The yuan is weakening due to the poor sentiment," said Ken Peng, an investment strategist at Citi Private Bank in Hong Kong. "Rather than trying to accelerate the decline, Chinese policy makers will more likely seek to prevent the currency from slumping too much, as that would lead to capital outflows.”

To contact the reporter on this story: Tian Chen in Hong Kong at tchen259@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Ron Harui, David Watkins

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