After taking a hammering in June, China's stocks and currency are off to a rocky start to July.
Speculation was rife the central bank in China was intervening in the currency market to staunch losses and prevent a potentially destabilising sell-off in the yuan.
Punishing U.S. tariffs on some Chinese imports are due to take effect Friday, with China planning tariffs on an equal amount of U.S. exports.
Currently, the currency pair is trading at 6.6330 - up 0.24 percent on the day, but well below the high of 6.6390 seen on Friday.
For the day, the index plummeted 409.54 points or 1.41 percent to finish at 28,545.57.
The Dow fell 132.36 points or 0.54 percent to 24,174.82, while the NASDAQ slid 65.01 points or 0.86 percent to 7,502.67 and the S&P 500 dropped 13.49 points or 0.49 percent to 2,713.22.
The benchmark CSI300 Index .CSI300 ended the day down 1.3 percent, and the Shanghai Composite Index .SSEC was off 0.94 percent.
Hao Hong, chief strategist at Hong Kong broker BOCOM International, said it's too early to call the bottom.
Investors, anxious the trade row could derail a rare period of synchronized global growth, have pulled out of riskier assets in the past month or so.
"There is undoubtedly cause for concern, but not alarm on the prospects for the Chinese yuan. Now, I think, the realization comes in that downside risk could be more significant", Rainer Michael Preiss, executive director at Taurus Wealth Advisors, told CNBC's "Capital Connection".
The People's Bank of China, which helps guide the yuan by setting a daily trading range, didn't immediately respond to a request for comment.
Win Thin, global head of emerging-markets currency strategy, BBH said the recent weakness had sparked a lot of attention, but the drop reflects a general weakness in the emerging markets currencies.
The yuan's 3 per cent decline against the dollar over the past two weeks is largely seen as reflecting fears over a possible trade war between the world's two biggest economies. And ultimately, unless there's compromise in the trade dispute, the Yuan should remain under pressure.
Chinese stocks took another battering on Monday in the worst start to a second half of a year since 2015, as selling resumed amid worries over a falling currency, housing curbs and the impact of United States trade tariffs.
Focus was on whether the RBA makes a mention of the recent U.S.
Officials in China, the epicenter of the worldwide trade row, have warned the United States that the tit-for-tat tariffs on each others' goods will ultimately prove detrimental for American businesses and jobs.
The mood was more cheerful in Europe where a pan-European equity index rose half a per cent, the euro firmed marginally and bond yields rose after German Chancellor Angela Merkel struck the deal with her Bavarian conservative coalition partners.
The dollar last stood at 110.97 yen, giving up gains following sharp falls in Chinese shares.
Also muddying trade relations between the world's two largest economies was a Chinese court ruling that temporarily barred USA chipmaker Micron Technology Inc (MU.O) from selling some of its main products in the world's biggest memory chip market. -China trade tariffs, traders were more concerned about jettisoning risk which could have contributed to the amplified price action.
The Aussie dollar came off a 1-1/2-year low of $0.7311 plumbed overnight, fetching $0.7368.
Pan Gongsheng, director of the State Administration of Foreign Exchange and a central bank deputy governor, stressed at a forum in Hong Kong on Tuesday that China is "confident in maintaining the renminbi basically stable" at a reasonable level.