The Chinese yuan dropped 0.4% in offshore trade to 7.1685 per dollar, touching its lowest in five weeks before bouncing to 7.1461
Global stocks recouped early losses as news reports raised hopes that the United States and China would settle some economic disputes, but investors were kept on edge by an earlier report that trade talks due to begin on Thursday could be cut short.
US S&P500 mini futures ESc1 traded down 0.2%, with a big part of early losses cut after the New York Times reported Washington will soon issue licenses allowing some US firms to supply non-sensitive goods to China's Huawei Technologies.
Another report, from Bloomberg, that the White House is looking at rolling out a previously agreed currency pact with China, also raised hopes of a partial deal and helped to lift risk assets.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS were flat while Japan's Nikkei .N225 gained 0.3%. Shanghai shares .SSEC also rose 0.35%.
Earlier US stock futures slumped as much as 1.3%, as the South China Morning Post (SCMP) reported the Chinese delegation, headed by Vice Premier Liu He, was planning to leave Washington after just a day of minister-level meetings, instead of as originally planned on Friday.
Top negotiators from the two countries were scheduled to meet in Washington on Thursday and Friday to try to end a bruising 15-month-old trade war.
Though there were some conflicting reports on whether Liu's plans have been changed, many market players remained cautious.
Without significant progress, US President Donald Trump is set to hike the tariff rate on $250 billion worth of Chinese goods to 30% from 25% next Tuesday.
"Barring any surprise today, it looks like their talk is breaking down. The tariff will be hiked. The situation looks dire," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The SCMP report on the US-China trade talks came less than a couple of hours after Trump told reporters he thought China wanted to make a trade deal more than he did.
Chinese government officials told Reuters that Beijing has lowered expectations for significant progress from this week's trade talks with the United States, upset by the blacklisting of Chinese companies.
China is unlikely to be willing to make an easy compromise with a US president who seems increasingly vulnerable to domestic political pressure as opposition Democrats seek to impeach him, Mitsubishi's Fujito added.
US Democratic presidential contender Joe Biden called for the impeachment of Trump for the first time in a deepening partisan fight over a congressional investigation of the Republican president.
In the currency market, the offshore yuan reversed early losses to gain 0.3% to trade at 7.1148 per dollar CNH= following the Bloomberg report about a US-China currency pact.
"The yuan rose on expectations of a currency pact. If there will be such an agreement, the yuan could rise to 6.9 to the dollar. But the trouble is, no one knows what's in that pact that they had reportedly agreed in February," said Ei Kaku, currency strategist at Nomura Securities.
In the onshore trade, the renminbi gained 0.25% to 7.1130 CNY=CFXS.
The safe haven yen and Swiss franc gave up most of their early gains.
The yen last stood almost flat at 107.56 JPY= while the Swiss franc traded at 0.9946 franc per dollar CHF=, about 0.1% higher than late US levels. The euro firmed slightly to $1.0986 EUR=.
Sterling wobbled near one-month lows against the dollar and the euro as hopes of a break-through on a key sticking point for a Brexit deal were dashed.
Northern Ireland's Democratic Unionist Party, a coalition partner in the British government, said it would emphatically oppose a reported European Union concession on the Irish backstop under any Brexit deal.
The pound last stood at $1.2227 GBP=D4, up 0.2% for the day but still not far from Tuesday's five-week low of $1.2196.
The Turkish lira retreated to six-week lows as Turkish troops, together with their Syrian rebel allies, attacked Kurdish militia in northeast Syria, opening a fresh chapter in Syria's eight-year-old civil war.
The lira fell to 5.8777 per dollar TRYTOM=D4, the lowest since its flash crash on Aug. 26.
US Treasuries yield slipped back after having risen to 1.594% on Wednesday, pressured partly by this week's heavy bond supply.
The 10-year Treasuries yield dipped to one basis point to 1.577% US10YT=RR.
The price of front-end Fed funds rate futures gained on increasing bets on more rate cuts by the US Federal Reserve.
The November contract FFX9 is almost fully pricing in a 0.25 percentage point cut on Oct. 30.
Oil prices also slid on wariness over US-China talks. Brent crude LCOc1 futures fell 0.26% to $58.17 a barrel while US West Texas Intermediate (WTI) crude CLc1 lost 0.29% to $52.44 per barrel.