(Adds Chinese shares, updates prices throughout)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan skids for a seventh day in a row
* Flight to safety boosts yen, bonds and gold
* Currency wars feared as China's yuan breaks past 7 per dlr
* Markets wager on even sharper U.S. monetary easing
By Swati Pandey and Wayne Cole
SYDNEY, Aug 5 (Reuters) - Asian shares slid to 6-1/2-month lows on Monday and the yuan slumped to a more than decade trough as a rapid escalation in the Sino-U.S. trade war sent investors stampeding to traditional safe harbours including the yen, bonds and gold.
Markets have been badly spooked since U.S. President Donald Trump abruptly declared he would slap 10% tariffs on $300 billion in Chinese imports, ending a month-long trade truce. China vowed on Friday to fight back. response, China's yuan CNH= CNY= burst beyond the psychological 7-per-dollar threshold in a move that threatened to unleash a new front in the trade hostilities - a currency war. is selling off right now," said Ray Attrill, head of forex strategy at National Australia Bank in Sydney. "We have no reason to expect any cessation in selling unless we see any strong action to defend any CNY or CNH weakness."
"Our working assumption is that we are unlikely to see any meaningful resolution to the trade dispute anytime soon."
Asian share markets were a sea of red with Japan's Nikkei .N225 shedding 2.4% to the lowest since early June. It was the sharpest daily drop since March.
Australian shares .AXJO slipped about 1.4% to spend their fourth straight session in the red, and South Korea's Kospi .KS11 tumbled 2.2% to hit its lowest since December 2016.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS sank 2.1% to depths not seen since late January.
In China, the blue-chip index .CSI300 fell 0.8% while the troubled Hong Kong market .HSI hit a seven-month trough. The pain quickly spread globally, with E-Mini futures for the S&P500 ESc1 and FTSE futures FFIc1 both down over 1%.
Oil prices were also pulled down again on demand worries, while gold climbed 0.65% to $1,450.41 an ounce XAU= .
The grim mood followed declines on Wall Street on Friday with MSCI's gauge of world stocks .MIWD00000PUS posting its largest weekly loss of the year.
The trade dispute between the world's two largest economies has already disrupted global supply chains and slowed economic growth.
The abrupt escalation capped a critical week for global markets after the U.S. Federal Reserve delivered a widely anticipated interest rate cut and played down expectations of further easing.
EVER DEEPER CUTS
So far, investors are not buying Fed Chair Jerome Powell's claim that the 25-basis-point rate reduction was a mere "mid-cycle adjustment to policy".
Futures are now pricing in deeper cuts than before last week's Fed meeting. The terminal U.S. rate 0#FF: is seen at 1.22%, 93 basis points below the current effective rate.
Analysts at TD Securities are forecasting no less than five more cuts from the Fed, amounting to 125 basis points of easing, over the coming year or so.
Bond markets were well ahead of the game as U.S. 10-year yields US10YT=RR dived 7 basis points to 1.77%, a violent shift for usually cautious Asian hours. Yields in Australia and New Zealand touched all-time lows.
German 10-year government bond yields DE10YT=RR on Friday dropped to an all-time low of -0.502% and the country's entire government bond yield curve turning negative for the first time ever. flight to safety lifted the yen, which often gains at time of stress thanks to Japan's position as the world's largest creditor. The dollar slipped to a seven-month trough of 105.78 yen JPY= , while the euro sank to its lowest since April 2017 at 117.64 yen EURJPY= .
That dragged the dollar index .DXY off 0.1%, though it was up against most other Asian currencies and those exposed to China or commodities including the Australian dollar AUD= .
The Aussie AUD=D3 , a liquid proxy for emerging market and China risk, slipped to a fresh seven-month trough at $0.6748 after losing 1.6% last week.
The Swiss franc CHF= was also boosted by safe-haven demand from the escalating trade tensions. Trump is also eyeing tariffs on the European Union, but is yet to make any formal announcements. The euro EUR= was relatively steady on the dollar at $1.1119.
Sterling GBP= hovered near 2017 lows at $1.2159, pressured by concerns about Britain exiting the European Union without a deal in place.
The pound has been whiplashed since late last month when Boris Johnson, a figurehead for the "leave" campaign in the 2016 Brexit referendum, became the country's prime minister. extended losses with U.S crude CLc1 off 26 cents at 55.40 and Brent LCoc1 down 35 cents at $61.54.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Asia stock markets
https://tmsnrt.rs/2zpUAr4 Asia-Pacific valuations
https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Sam Holmes and Richard Borsuk)