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US-China trade war escalates as yuan falls

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
A TV screen shows the numbers after the closing bell at the New York Stock Exchange (NYSE) on August 5, 2019 at Wall Street in New York City. (AFP photo)

US President Donald Trump's pledge to impose new tariffs on Chinese goods is showing its impact on the Wall Street.

Amid a fall in the yuan, the benchmark S&P 500 dropped about 3 percent on Monday.

"I think it's China signaling that they're going to...they've had enough, effectively. And 7 has always been kind of a psychologically important, I don't know that it's economically all that important, but psychologically it's always been the line in the sand,” said Bruderman asset management chief market strategist, Oliver Pursche. “And them letting go of that and allowing the yuan to depreciate below that number, I think signals to the world, signals to President Trump, 'Hey we've had enough and we're going to use levers of our own.'"

Traders work on the floor of the New York Stock Exchange (NYSE) on August 05, 2019 in New York City. (AFP photo)

‘US destroying int. order’

The rapidly escalating trade war between the world's two biggest economies followed Washington’s claim that Beijing is a "currency manipulator."

"The immediate impact is limited as it is usually a long process. The treasury will hold special talks with China and US may consult with IMF, so IMF will also be part of the picture," said Tommy Xie, the head of Greater China research at OCBC Bank in Singapore.

According to Chinese People's Daily, the United States is "deliberately destroying international order."

Stock markets were knocked down after the US Treasury Department said Monday that it had determined for the first time since 1994 that China was manipulating its currency.

China announced earlier that it was allowing the yuan break through the key 7-per-dollar level for the first time in more than a decade.

This came after Washington threatened to impose more tariffs on Chinese goods from the start of next month, in the wake of US President Donald Trump’s incessant criticism of China.

The Asian country’s central bank, meanwhile, said it was selling yuan-denominated bills in Hong Kong.

The Chinese yuan has fallen to its lowest level against the dollar since August 2010.

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