Trump accuses China of manipulating currency as yuan weakens

Trump accuses China of manipulating currency as yuan weakens

The yuan's move sent chills through global financial markets as investors saw few options for a de-escalation of trade tensions between the United States and China.

Monday marked the first time the yuan had breached the 7-per-dollar level since May 9, 2008.

But Mr. Trump said the currency devaluation was evidence his tariffs aren't harming USA consumers, as some analysts had said.

China's central bank sets the exchange rate each morning and allows the yuan to fluctuate by 2% against the dollar during the day. "Trump's tariffs threats are backfiring and triggering a full-scale trade war".

The 1.4 percent drop in the yuan comes just days after Trump angered China with plans to tariff $300 billion of Chinese imports at 10 percent starting next month.

"If anything, it had been currency stability that was used within the trade war. Beijing [is] far more advanced in playing the currency game [and has] bigger firepower".

The plummeting figures come hours after the yuan finished at a value of 7.0392 on Monday, a move which was quickly slammed by US President Donald Trump as a "major violation" and "currency manipulation".

China and the US trade negotiators failed to reach a deal in an ongoing trade dispute during talks last week in Shanghai, agreeing to meet again in September in Washington D.C. The next day, President Trump tweeted that the USA would impose an additional 10 percent tariff on the remaining $300 billion worth of Chinese goods not yet taxed.

China announced Monday its companies have halted purchases of American agricultural goods.

At the time of writing, Dow Jones has dropped 785 points. The 2-year yield dropped 11-basis points down to 1.60. New export orders fell to 53.5 from 55.5 in June.

In Asia, where tensions between Seoul and Tokyo are worsening in a trade dispute entirely separate from Washington's and Beijing's, Japan's Nikkei 225 index fell 1.7%, and South Korea's Kospi lost 2.6%.

The Nasdaq Composite also lagged, falling by 3.4 percent meaning it is on track to fall for a sixth straight session, which would be its longest losing streak since late 2016.

Every sector in the S&P 500 fell, though utilities only had modest losses.

Technology stocks such as Apple and IBM were hit especially hard. The CNN Business Fear & Greed Index is indicating "Extreme Fear". Investors in search of safety herded into US government bonds, which sent yields plunging lower.

European stocks also tumbled on Monday with the FTSE 100, representing the leading companies listed on the London Stock Exchange, down 2.78 percent. Germany's DAX and France' Cac 40 closed 1.8% and 2.2% lower, respectively. That inversion of the yield curve has predated every past recession. China had threatened to retaliate on Friday without saying exactly how it would respond.

The decline makes Chinese imports to the United States less expensive, and thus makes US companies less competitive.

China's move gives rise to an even gloomier outlook in the trade conflict that has tied up the world's two most powerful economic engines for more than a year, while threatening the health of the global economy and upending the foundations of worldwide trade.

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