Stock markets largely settled down on Tuesday as China stepped in to stabilize the yuan, soothing concerns that currencies would be the latest weapon in a long-drawn trade war, a day after Wall Street suffered its sharpest one-day percentage drops of the year.

China’s overnight intervention came after the U.S. Treasury Department labelled Beijing a currency manipulator as it let the yuan slide to a more-than-decade low on Monday.

American officials complain that a weak yuan — also known as the renminbi, or people’s money — makes China’s export prices unfairly low, hurting foreign competitors and swelling Beijing’s trade surplus.

A steep fall in the Chinese currency had led the benchmark S&P 500 and Nasdaq record their sixth straight session of declines, losing at least three per cent each on Monday. 

Then on Tuesday, the ruling Chinese Communist Party’s main newspaper accused Washington of “deliberately destroying the rules-based international order” and jeopardizing economic co-operation. It didn’t mention Monday’s currency decision but accused the Trump administration of using American families as hostages in trade talks.

“One cannot understand how such a big, internationally influential country could be so irresponsible,” the People’s Daily said.

The Chinese central bank denied improperly manipulating the exchange rate. It said the yuan’s decline was driven by market forces.

The U.S.’s accusation of currency manipulation is “protectionist behaviour” that will have “a major impact on global finance,” the People’s Bank of China said on its website.

But later on Tuesday, China’s central bank buttressed the yuan by fixing it at a slightly stronger rate, which ratcheted down the tensions a little.

The Chinese central bank governor, Yi Gang, tried to reassure investors, promising in a statement to stick to commitments “not to use exchange rates for competitive purposes.”

The central bank is “committed to maintaining the basic stability” of the yuan “at a reasonable and balanced level,” Yi said.

The yuan has lost five per cent against the dollar since hitting a high in February of 6.6862 to the dollar.

A weaker yuan helps exporters cope with tariffs of up to 25 per cent imposed by Trump on billions of dollars of Chinese goods. But it raises the risk of inflaming American complaints.

A weaker yuan also might disrupt Chinese efforts to shore up cooling economic growth. It would raise borrowing costs by encouraging an outflow of capital from the world’s second-largest economy.

As such, the move to strengthen the yuan, along with White House economic adviser Larry Kudlow’s comment that President Donald Trump was planning to host a Chinese delegation for further talks in September, allayed fears of a further escalation in trade war.

The S&P 500, still reeling from last week’s shock when Trump vowed to slap a 10 per cent tariff on a further $300 billion in Chinese imports, is 5.6 per cent away from its all-time high hit last month.

“Both sides are at that point where they must go back and renegotiate,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

“Yesterday’s big drop-off has allowed bargain hunters to find bargains.”

The Toronto Stock Exchange, which was closed for a holiday on Monday, lost more than 200 points, or one per cent, to just over 16,000 points.