The Chinese yuan has retreated to its lowest level against the dollar

The Chinese yuan has reached its lowest level against the dollar since August 2010, suggesting that Beijing would seek to devalue its currency to counter the US tariffs.

The exchange rate of the Chinese yuan fell to 7.1085 against the dollar a few days after the announcement by US President Donald Trump of a plan to impose tariffs of $ 300 billion on new Chinese products, exacerbating trade tensions between the world's two largest economic powers.

In the Chinese market, the yuan traded at 7,0307 against the dollar on Monday morning, its lowest level since 2008.

The yuan has crossed the threshold of 0.7 in domestic and foreign markets, which investors consider to be the minimum monetary value.

The US president has repeatedly accused China of deliberately devaluing its currency to support its exports, which Beijing has always denied.

Trump shocked markets last week when he threatened to impose more tariffs after the resumption of talks between Washington and Beijing to end the trade dispute between the two countries.

If Trump threatens to raise tariffs by 10% as of September 1, all Chinese imports to the United States, worth $ 500 billion a year, will be subject to fees. China threatened Friday to retaliate against any new US tax, although it has already imposed a $ 110 billion tax on US goods, almost everything it imported from the United States. United States.

According to a report by Bloomberg, China has asked state-owned companies to stop buying US agricultural products, further sign of rising tensions. China is subject to monetary restrictions and allows the currency to fluctuate against the dollar by less than 2% of the benchmark rate set daily by the Bank of China. The central bank has set the yuan at $ 6.9225, down 0.33% from Friday.

"The increase in tariffs seems to be an indicator of the return of retaliatory reactions and the suspension of trade negotiations, so the Chinese center does not see the need to maintain the stability of the yuan exchange rate in the short term", said Mizuho Kenzhong, currency strategist at Mizuho Kenzhong Bank.

In a statement released Monday, China's central bank said the yuan's exchange rate against the dollar had been "affected by unilateralism, trade protectionism and increased tariffs on China." ", adding that the yuan maintained" its stability and resistance against a basket of currencies, "he said. Foreign exchange market and market expectations. "

He stressed that he had "the experience, confidence and ability to keep the exchange rate of the Chinese currency at a reasonable and balanced level".

The Chinese central bank "virtually uses the exchange rate as a weapon" by linking the value of the currency to the trade war with the United States, said economist Ian Evans Pritchard. "Assuming their goal is to ease the new US tariffs, Probably with a further decline in the value of their currency between 5 and 10% over the next quarters."

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