The yuan has fallen to its lowest level in 11 years as the US-China trade war continued to grip markets.

The Chinese currency sunk below to 7.1500 a dollar, the lowest rate since February 2008, on Monday after Washington and Beijing confirmed further tit-for-tat tariffs on hundreds of billions of dollars worth of imports.

This latest flare-up also sent shares down sharply across the Asia-Pacific region, as investors ditched equities in favour of safe-haven government bonds. Gold – another measure of investor angst – hit its highest level in six years, at $1,554 an ounce.

Markets stabilised after Donald Trump claimed that China had asked to resume negotiations. Speaking at a G7 meeting in Biarritz, France, the US president said phone calls had taken place “at the highest level”.

“China called last night … said let’s get back to the table. So we’ll be getting back to the table,” Trump said.

Beijing play down the claim. Geng Shuang, a spokesman for its foreign ministry, said he was unaware of these phone calls.

The Chinese vice-premier, Liu He, who is Beijing’s top trade negotiator, also attempted to calm the crisis. He told a tech conference in Chongqing that China was willing to resolve its trade dispute with the US through calm negotiations, and resolutely opposed the escalation of the conflict.

Trump welcomed those comments, claiming that China wanted to make a deal “very badly”.

“China has taken a very hard hit over the last few months. It has lost 3 million jobs, and that will soon be much more,” he said.

Trump added that he would only sign up to a deal if it was “fair”, and “a good deal for the United States”.

The drop in the yuan will help Chinese exporters compete abroad, and soften the blow of US tariffs. The fall could also stoke tensions with Washington, which called China a “currency manipulator” this month.

The yuan’s losses came as China’s CSI 300 stock index fell by 1.4%. The Hang Seng in Hong Kong closed down by nearly 2%, the Nikkei in Tokyo by 2%, and Seoul’s Kospi by 1.5%.

Yields on benchmark 10-year US treasury debt dropped to their lowest since mid-2016 as money was funnelled into the safety of government debt..

Australia’s benchmark S&P/ASX200 index in Sydney closed down 83 points, or 1.27%, with many companies exposed to China’s economy leading the selloff.

In Australia, energy and tech shares fell 2.91% and 2.82% respectively, leading losses as every sector started in the red.

The mining group BHP was down 2.12% to Aus$34.67, Rio Tinto was down 2.62% at Aus$82.775 and Fortescue Metals was down 3.57% at Aus$7.30.

The big four banks – ANZ , Commonwealth, NAB and Westpac – were down between 1.55% and 2.52%.

The Chinese government announced retaliatory tariffs on $75bn of US goods on Friday. Trump, countered by saying the US would raise its existing tariffs on $250bn worth of Chinese imports from 25% to 30% on 1 October.

“If there was any doubt before, it’s a trade war now,” said Kit Juckes, head of foreign exchange strategy at the French bank Société Générale.

Shares nudged higher on Wall Street on Monday, with the Dow Jones industrial average up 134 points, or 0.5%, in morning trading. It had tumbled by 2.4% on Friday, losing 623 points.

Fears that the US-China trade war will hurt global growth have prompted the Swiss bank UBS to cut its rating on equities to underweight, for the first time since the 2008 financial crisis.

“We estimate the direct impact of all the additional tariffs will represent only a marginal drag on the US economy. But downside risks are increasing for both the global economy and markets,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Chris Weston, head of research at the brokers Pepperstone in Melbourne, said there was a growing belief that Trump was not concerned about the negative effect of his policies on share prices.

“The fact that many are now seeing the division between [the Chinese president Xi Jinping] and Trump as something more sinister than just a trade war has seen [the case] for a global recession increase,” he said.

Trump’s calls for US businesses to pull out of China would have an impact on their sales and net interest margins, Western said, adding another layer of concern. “We are even hearing, at a worst-case-scenario, that the US could restrict China’s access to the financial markets and that is a genuinely scary proposition.”