The Chinese yuan crossed a closely watched barrier against the dollar on Monday following another escalation in the trade war between Beijing and Washington.
In the afternoon of Asian trading hours, the onshore Chinese yuan changed hands at 7.0304 against the dollar.
while the offshore yuan traded at 7.0807 against the greenback.
The Chinese currency last breached the 7 levels against the dollar during the global financial crisis in 2008.
The sharp weakening in the Chinese currency came after U.S. President Donald Trump unexpectedly announced fresh tariffs on Beijing last week that is set to take effect from Sept.
Responding to Trump’s move, China’s foreign ministry said on Friday that the country does not want a trade war with the U.S. but is not afraid of fighting one.
The U.S. and China have been locked in a trade war that has lasted more than a year.
with tariffs being placed on billions of dollars worth of each other’s goods.
The protracted dispute has dented market sentiment and raised concerns over the outlook for the global economy.
On Monday, the Chinese central bank set the yuan’s midpoint at 6.9225 against the dollar — its weakest level since December 2018.
For its part, the Chinese central bank said Monday it is confident of being able to keep the yuan basically stable.
In a statement published on its website, the central bank largely attributed the losses in the yuan to trade protectionism and tariffs on Chinese goods.
Economists that spoke to CNBC generally advised investors to wait and see further developments on the Chinese yuan’s movements.
While Trump has in the past accused China of manipulating its currency.
his administration has refrained from labeling the country a currency manipulator.
Bank of America Merrill Lynch’s Piron said there are several “recourses” being discussed in the U.S. on the subject of foreign exchange depreciation.
such as “attempts by Congressmen to put other bills through Congress … to call for a depreciation of the dollar.”
Such an attempt would largely be futile, he said:
“If we go for currency war and we all try to depreciate, it’s a kind of zero-sum game.”