The United States must show sincerity if it is to hold meaningful trade talks, China said on Friday, after US President Donald Trump dramatically raised the stakes with a potentially devastating blow to Chinese tech giant Huawei.

"Rhetoric from both sides is getting more heated, making a US-China deal seem a long way off," Win Thin, global head of currency strategy at Brown Brothers Harriman in New York, said in a report.

"At this point, this means there will be no high-level negotiations between the two until a potential Trump-Xi (Jinping) meeting at the G20 meeting in late June.

This means the next round of tariffs will likely come into play, signaling further escalation and making a deal that much harder," Thin said.

The world's two largest economies are locked in an increasingly acrimonious trade dispute that has seen them level escalating tariffs on each other's imports in the midst of negotiations.

The Chinese yuan fell as far as 6.949 against the dollar on Friday, its weakest level since Nov. 30.

China's central bank will use foreign exchange intervention and monetary policy tools to ensure the yuan does not weaken past the 7-per-dollar key level in the immediate term, three people familiar with the central bank's thinking said.

The Australian dollar dropped to its lowest level since Jan. 3 on the escalating trade tensions.

The euro gave back earlier losses against the dollar after the White House said that President Donald Trump is delaying a decision by up to six months on whether to impose tariffs on imported cars and parts to allow for more time for trade talks with the European Union and Japan.

The single currency has been hurt this week by Italian Deputy Prime Minister Matteo Salvini's comments that European Union rules harm the country.

Salvini said on Thursday that he would "tear apart" rules that are "strangling" Italy if his party scores well in the European parliamentary elections next week.

Sterling hit a four-month low on Friday after cross-party Brexit talks collapsed and concern grew about the impact Prime Minister Theresa May's likely resignation would have on Britain's exit from the European Union.