China's yuan was set for its worst daily fall in nine months on Monday as trade negotiations between the U.S. and China ended after President Donald Trump raised tariffs on Chinese goods.
Currency moves in response to the latest trade hostilities have been muted, but on Monday the yuan fell 0.85% to 6.9043, its weakest since December. 27. Some analysts say it may breach 7 per dollar in coming months, a level last seen during the global financial crisis.
China would probably use its vast currency reserves to stop any plunge through 7 to the dollar, which could trigger speculation and heavy capital outflows.
"We’re waiting to see if China retaliates to the latest round of U.S. tariffs ... and continue to favour the yen on a short-term basis and expect the market to remain focussed on the yuan," said Chris Turner, an ING currency strategist.
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