SINGAPORE, March 22 Reuters Chinese stocks slumped on Friday and the yuan fell, dragging down markets broadly in Asia and rupturing an equity market rally spurred by a surprise rate cut in Switzerland that had investors wagering on who will ease policy next.

Traders were left on high alert in Asia with a yen creeping back toward multidecade lows and jawboning efforts from Japanese government officials ramping up, alongside sliding Chinese stocks triggered by a sudden fall in the currency.

China39;s yuan weakened to a fourmonth low on Friday and breached the psychologically important 7.2 per dollar level. It was last nearly 0.4 lower at 7.2266 per dollar.

The fall prompted the country39;s major stateowned banks to sell dollars for yuan in an attempt to slow its decline, sources told Reuters.

That did little to soothe investors39; nerves, as Chinese stocks tumbled in step with the yuan.

The mainland bluechip CSI300 index and Shanghai Composite index each fell more than 1, while Hong Kong39;s Hang Seng Index slid 3.

Sentiment is very fragile today, said Wong Kok Hoong, head of equity sales trading at Maybank, citing concerns over weak earnings across Chinese companies and continued headwinds facing the country39;s property sector, among other things.

Elsewhere, a weakening yen was also back on traders39; radars, as it again hit a fourmonth trough of 151.86 per dollar and remained a whisker away from a multidecade low.

A landmark rate increase from the Bank of Japan…