China's yuan slips to 11-year low

The Chinese yuan fell more than 1% on Monday, dropping below the 7-per-US-dollar mark for the first time since the global financial crisis.

Asian markets also fell on Monday: Tokyo closed down 1.6% and Hong Kong declined 2.9%. 

The dip came days after Beijing warned it would hit back at US President Donald Trump's threat to impose new tariff hikes on Chinese goods, fueling speculation that China is allowing its currency to depreciate. 

Trump accused China of "currency manipulation" after the yuan weakened to 7.0391 to the US dollar, making one yuan worth 14.2 cents — its lowest level since February 2008. A weaker yuan results in cheaper Chinese exports. 

Read more: Asia's triple whammy — China slowdown, trade war and chips

Trade war escalates

The People's Bank of China said there was nothing significant about the yuan's weakened value, but added that it was the result of "unilateralism and trade protectionism measures."

Masashi Hashimoto, senior currency analyst at MUFG Bank, said "this could well be the biggest moment for the yuan this year. The impact of US-China trade is turning out to be very big." 

Trump last week announced he would increase tariffs on $300 billion (€270 billion) worth of Chinese imports to 10% from September 1.

China's Foreign Ministry responded on Friday, vowing to take "necessary countermeasures" to protect its interests.

Read more: US-China trade spat: China's Asian neighbors see record investments

The latest threat from Washington comes on top of the $250 billion worth of Chinese products already subject to a 25% levy. China has issued its own retaliatory tariffs, taxing $110 billion worth of American goods. 

Anxiety over an escalation in the spat also hit other currencies in the region on Monday. The Australian dollar shed 0.35% to $0.6773, hitting a seven-month low of $0.6748. The Korean won fell 1%, reaching a three-year low of 1,218.3 per dollar while the new Taiwan dollar dropped over 0.7% to a two-month low.

The long-running trade war between the US and China has seen both sides having imposed punitive tariffs and has sparked fears for economic growth prospects worldwide. Last month, the International Monetary Fund downgraded its 2019 global growth forecast from 3.3% to 3.2%.

kw, nm/aw (AP, Reuters, dpa)

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