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After being hit by a hammer in June, Chinese equities and currency started badly in July.
Fear of a slowdown in the country's economy of a trade war with the United States weighed on Chinese equities and the yuan.
The benchmark stock index in Shanghai, which entered a bear market last week, is trading near its lowest level in more than two years. The yuan reached its lowest level against the dollar in 11 months on Tuesday before bouncing back amid reports that the government had intervened to support the currency.
A weaker yuan could help Chinese exporters by making their products cheaper, but it also risks increasing trade tensions with the Trump administration.
The previous big dives in the yuan in recent years have wreaked havoc on the Chinese and global stock markets. The Chinese government said Tuesday it wants to maintain the stability of the yuan.
Other emerging market currencies also fell against the strengthening of the dollar. But the strong dollar "is less of a valid argument" for recent declines in the yuan, according to Tai Hui, senior market strategist at JPMorgan Asset Management in Asia.
The yuan has also lost ground against the currencies of China's other major trading partners, such as the euro.
Related: The Chinese economy is showing signs of slowing down. A trade war will not help
The question is how much longer and how fast the yuan could fall.
"There is definitely reason to worry, but not alarm about the outlook for the Chinese yuan," said Aninda Mitra, senior analyst at BNY Mellon Investment Management in Singapore, in a note on Tuesday.
He acknowledged that during a trip to Shanghai last week, he "detected a growing concern over trade tensions and a lot of nervousness about a trade war, which happens to a bad moment for China, where the economy is experiencing a decline at the same time, the United States is experiencing a strong recovery. "
Washington and Beijing are preparing to impose tariffs on tens of billions reciprocal export dollars on Friday, which raises fears of an escalation on the part of the state.
Analysts generally reject suggestions that China could use the weaker yuan as a weapon in the trade dispute. They point to the chaos caused in the Chinese and global markets by sharp declines in the currency in 2015 and early 2016.
"This is not a Pandora's Box that Beijing wants to reopen," Hui said.
Instead, analysts are waiting for the Chinese government to intervene to prevent the currency from diving too quickly.
Related: A US-China trade war will spread in other Asian economies
In a statement released Tuesday on the Chinese central bank's website, Governor Yi Gang said declared market fluctuations and will seek to keep the yuan at a reasonable level.
After falling 0.8% against the dollar on Tuesday, the yuan recovered its losses in the afternoon, moving into positive territory. Some reports quoted traders as saying that the big Chinese state-owned banks, which sometimes act on behalf of the central bank, were buying the yuan.
The People's Bank of China, which helps guide the yuan by establishing a daily trading range, did not immediately respond to a request for comment.
If the Chinese authorities fight to keep the yuan under control, the problems could spread.
"Continued pressure on the Chinese stock and stock market following a deterioration of sentiment is a major risk for markets in China and elsewhere," writes Louis Kuijs, head of the Asian economy at Oxford Economics, in a note to customers. Friday.
Chinese stocks have also been volatile.
The Shanghai index fell 2.5% Monday and fell more than 1% Tuesday morning. He recovered later in the day, closing 0.4% higher.
Related: Chinese stocks enter bearish market territory
Recent losses – the index is down nearly 22% from a recent high in January – seem to have fueled the concerns of the Chinese authorities.
"The stock market crash is an excessive irrational reaction," headlined on the front page of the state-owned Securities Daily on Tuesday.
Hao Hong, chief strategist at BOCOM International, Hong Kong broker, said that it was too early to call the merits.
"The selling pressure on the market is driven by factors that go beyond the fundamentals," he wrote in a research note.
– Serenitie Wang contributed to this report.
CNNMoney (Hong Kong) First published July 3, 2018: 07:39 ET
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