* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
* Markets rattled by escalation in U.S.-China trade war
* Yen, Swiss franc, and gold rise on risk aversion
* Traders braced for spike in volatility
By Stanley White
TOKYO, Aug 26 (Reuters) - The yen surged on Monday as investors flocked to safe-haven assets after a sharp re-escalation in the U.S.-China trade war, which whacked investor confidence and darkened the global economic outlook.
The yuan also tumbled in offshore trade, weighed by expectations of a deeper slowdown in China as the world’s two-largest economies exchanged barbs over trade.
The Swiss franc and gold, two assets sought during times of heightened risk aversion, shot up in early Asian trade.
Financial markets could be in for a rough ride in the near future as investors are likely to shift money from stocks to less risky assets, such as debt, gold and safe-haven currencies.
“Speculators came into the market very early to put heavy pressure on dollar/yen,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.
“The fact that the offshore yuan is down this much shows speculators have gotten a little wild. The trade war is driving all these moves, and I don’t see this ending anytime soon.”
The yen surged to 104.46 per dollar, the highest since a flash crash this January, before paring gains to 104.70, up more than 0.5%.
The yen will next target 104.10 per dollar, which is the high it reached during a flash crash on Jan. 3 that roiled financial markets, Daiwa Securities’ Ishizuki said.
In the offshore market, the dollar rose 0.6% to 7.1850 yuan, the highest on record.
U.S. stocks tumbled on Friday when President Donald Trump announced an additional 5% duty on $550 billion in targeted Chinese goods, hours after Beijing unveiled retaliatory tariffs on $75 billion worth of U.S. products.
At the G7 meeting in France over the weekend, Trump caused some confusion by indicating he may have had second thoughts on the tariffs.
The White House on Sunday clarified these comments, saying Trump wished he had raised tariffs on Chinese goods even higher last week, even as he signalled he did not plan to follow through with demands that U.S. close Chinese operations.
The yen also surged around 1% versus the Australian and New Zealand dollars.
The dollar fell 0.2% to 0.9729 Swiss franc.
Spot gold also rose 1.4% to $1,548.93 per ounce. (Reporting by Stanley White; Editing by Sam Holmes)