Trump, on Friday, lamented the recent strength of the U.S. dollar and accused the European Union and China of manipulating their currencies.
The behavior of the Central Bank of China represents the beginning of a currency war.
The pan-European FTSEurofirst 300 index lost 0.15 percent, amid rising trade tensions. The US president's charges that China is "manipulating" a currency that's been "dropping like a rock" came at the end of a six-week slide that took it to its lowest level in more than a year against the dollar.
Threats and intimidation on trade will never work on China, its foreign ministry said on Monday, after US President Donald Trump said he was ready to impose tariffs on all $500 billion of imported goods from the country.
The pan-European STOXX 600 index slumped 0.2 percent at 384.94 points, while the FTSEurofirst 300 index plunged 0.3 percent to 1,506.82 points.
The central bank fixed the midpoint 298 basis points lower to 6.7891 this morning, the weakest since July past year, data shows.
In commodities, oil prices were held back by concern over the US-China trade tensions and increased supply.
USA crude was last off 3 cents at $68.24 a barrel after posting its third straight weekly loss. The U.S. economy likely grew at a 4.2 percent annual rate last quarter, the fastest since 2014, according to a Bloomberg survey. "If it's a tariff-only story, then for the time being it's still dollar-positive", because China and the euro region have more to lose than the U.S.in such an environment. Brent eased 17 cents to $72.90.
Spot gold was down 0.5 percent at $1,225.41 an ounce by 1441 GMT, close to last Thursday's low of $1,211.08, while USA gold futures for August delivery were down 0.5 percent at $1,225.50. Spot gold declined 0.1 percent at $1,229.83 an ounce by 1023 GMT, having hit a low of $1,211.45 on Thursday, its lowest since early July 2017.
The yield on 10-year Chinese government bonds CN10YT=RR ended 2.9 basis points higher at 3.562 percent. "Premier Li may be concerned about the negative impact of deleveraging on growth", ANZ economists Raymond Yeung and Betty Wang said in a note. The fixing was 298 pips or 0.44 percent weaker than Monday's midpoint of 6.7593.
Fed non-voter Bullard spoke with a dovish tone when he stated that United States rates were high by global standards, that Fed forecasts indicate further gradual tightening but that curve inversion may be imminent and would be a bearish signal. The yield on Australia's benchmark 10-year Note, which moves inversely to it price, fell 5 basis points to 2.628 percent, the yield on the long-term 30-year Note also dipped 5 basis points to 3.096 percent and the yield on short-term 2-year down 2 basis points to 2.048 percent.