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Chinese yuan plunges to 11-year low as trade war escalates

Chinese yuan plunges to 11 year low as trade war escalates

China's yuan fell more than one percent to an 11-year low on Monday as fears of a sharp escalation in the U.S.-China trade war are growing, leading to another currency slump in the Asian region.

As the Chinese currency suddenly crossed the 7-yuan barrier to the dollar for the first time since the global financial crisis in 2008, a level that some market traders see as a key support.

Meanwhile, the yuan rose about 1.4 percent to 7.035 per dollar in offshore markets, while the onshore yuan reached 7.0424 per dollar, noting that  this is the first time the Chinese currency to trade at this level since May 2008.

This fall came after the announcement made by the Chinese side to fight back against the tariffs made by the American side, as the U.S president Donald trump decided to impose a 10 percent tariffs on a Chinese product that worth more than 300 billion dollars as the end for trade truce between the two largest economies in the world.

In the same context, other Asian currencies associated to the Chinese currency were affected by this fall. Taiwan dollar fell more than 0.7 percent while the Korean won dropped 1.4 percent against dollar, marking the largest drop since August 2016.

Investors resort to safe havens

The Japanese yen, which is considered a safe haven for the traders, climbed 0.62 percent to 105.92 per dollar after it reached 105.78 earlier in the session.

Another safe haven which is the Swiss franc also rose 0.2 percent to reach 1.0883 against the euro. That is the highest level in two years.

In the meantime, the dollar index, which measures the performance of six major currencies against the dollar, fell 0.25 percent to 97.60 to extend its drop for a third session in a row.  

Last week, the Federal Reserve opted to cut interest rates by 25 basis points, but the dollar did not fall directly after the decision.

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