China could allow its currency to weaken to offset the impact of US tariffs on the country’s exports, but has so far declined to do so.

The yuan weakened on Wednesday as escalating U.S.-China trade tensions rattled Chinese markets post-Lunar New Year. The dollar surged over 0.5% against the yuan to 7.2856, despite the Peoples Bank of China (PBOC) setting

China extended its support for the yuan by setting its daily reference rate for the managed currency at a level stronger than 7.2 per dollar, as escalating trade tensions with the US add to the depreciation pressure on the yuan.

The yuan sank on Wednesday as a new Sino-U.S. trade war shook Chinese markets returning from an extended Lunar New Year break, while the yen jumped on rising bets of more Bank of Japan (BOJ) rate hikes this year.