The decline came amid lingering trade concerns as tariffs on billions of dollars in USA and Chinese goods are set to take effect later this week. "After all, nothing has been resolved on the Sino-US trade disputes".
The dollar was down 0.2 percent to the yen at 111.35 while the euro traded up 0.1 percent at $1.1665 against the euro. Retail stocks were down 3.58 percent, with Fast Retailing lower by 2.87 percent. The index closed lower by 0.27 percent at 6,177.80, with consumer stocks and gold producers recording the steepest declines.
In China, the Shanghai Composite Index shed 0.23 percent and the blue chip CSI300 index fell 0.19 percent. The Hong Kong market remained choppy and was last down 1.9 percent, while the Shanghai bourse edged up 0.05 percent.
"The euro is getting a bit of a lift on the German data though the trade concerns will continue to dominate markets with the Fed minutes being the key data point", said Kenneth Broux, a currency strategist at Societe Generale in London.
"That is why we've seen Chinese yuan and Chinese stocks have suffered selloffs. 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 yuan is the worst performing currency in Asia over the past month, losing more than 4% against the dollar as the domestic economy slows and the nation slides closer to a trade war with the US The currency strengthened immediately after the comments were reported, having earlier weakened beyond 6.7 to the dollar.
China's state-owned banks have reportedly been buying USA dollars in forwards on behalf of the central bank (PBOC) and immediately selling them into the spot market to support the yuan.
The central bank has closely watched recent fluctuations, Yi said, adding that China's economic fundamentals were sound and financial risks were largely under control.
At one point on Tuesday the yuan hit 6.7204 per dollar, its weakest level since early August, before sharply rebounding on reassuring remarks from Yi Gang, Governor of the People's Bank of China (PBOC).
Asian markets struggled on Tuesday, with Hong Kong briefly tumbling more than three percent, as investors fret over looming China-US trade tariffs that bring a potential trade war a step closer. Beijing has promised to retaliate with tariffs on USA products.
The US Commerce Department on Monday added to the standoff by recommending against the approval of China Mobile's seven-year-old application to enter the US market, citing national security concerns. President Donald Trump had also threatened on Monday to "do something" if the United States was not better treated by the World Trade Organisation.
The pair last traded at C$1.3115, its highest level in 2-1/2 weeks.
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.
The Aussie was steady at $0.7338 after dropping to $0.7311 overnight, its lowest since January 2017.
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