Hong Kong: The yuan plunged beyond 7 per dollar for the first time since 2008 amid speculation Beijing was allowing currency depreciation to counter President Donald Trump’s latest tariff threat.
The exchange rate tumbled 1.3% to 7.0344 a dollar at 4:45 pm local time after the People’s Bank of China set its daily reference rate at a weaker level than 6.9 for the first time since December. The offshore yuan sank as much as 1.9% to a record low, while the Shanghai Composite Index closed 1.6% lower.
The yuan declined 0.9% in mainland trading last week, its biggest loss since mid-May, after Trump abruptly escalated the trade war with new tariffs on Chinese goods. Beijing pledged to respond if the US goes ahead with a plan to impose a 10% tariff on a further $300 billion in Chinese imports.
“It appears that the tariffs hike suggests the return of tit-for-tat moves and a suspension of trade talks, and the PBOC sees no need to keep the yuan stable in the near term," said Ken Cheung, a senior currency strategist at Mizuho Bank.
The tumble exacerbated losses in Asia’s financial markets. The MSCI Asia Pacific Index dropped 2%, while the MSCI Hong Kong Index slid for a ninth day as protesters moved to shut down the city with a general strike.