* Graphic: World FX rates in 2019 http://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 asinvestors flocked to safe-haven assets after a sharpre-escalation in the U.S.-China trade war, which whackedinvestor confidence and darkened the global economic outlook.
The yuan also tumbled in offshore trade, weighed byexpectations of a deeper slowdown in China as the world'stwo-largest economies exchanged barbs over trade.
The Swiss franc and gold, two assets sought during times ofheightened risk aversion, shot up in early Asian trade.
Financial markets could be in for a rough ride in the nearfuture as investors are likely to shift money from stocks toless risky assets, such as debt, gold and safe-haven currencies.
"Speculators came into the market very early to put heavypressure on dollar/yen," said Yukio Ishizuki, foreign exchangestrategist at Daiwa Securities in Tokyo.
"The fact that the offshore yuan is down this much showsspeculators have gotten a little wild. The trade war is drivingall these moves, and I don't see this ending anytime soon."
The yen surged to 104.46 per dollar, the highest since aflash crash this January, before paring gains to 104.70, up morethan 0.5%.
The yen will next target 104.10 per dollar, which is thehigh it reached during a flash crash on Jan. 3 that roiledfinancial markets, Daiwa Securities' Ishizuki said.
In the offshore market, the dollar rose 0.6% to7.1850 yuan, the highest on record.
U.S. stocks tumbled on Friday when President Donald Trumpannounced an additional 5% duty on $550 billion in targetedChinese goods, hours after Beijing unveiled retaliatory tariffson $75 billion worth of U.S. products.
At the G7 meeting in France over the weekend, Trump causedsome confusion by indicating he may have had second thoughts onthe tariffs.
The White House on Sunday clarified these comments, sayingTrump wished he had raised tariffs on Chinese goods even higherlast week, even as he signalled he did not plan to followthrough with demands that U.S. close Chinese operations.
The yen also surged around 1% versus the Australianand 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)