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Markets Fear U.S.-China Trade War Could Morph Into Full-Blown Currency War By

Markets Fear U.S.-China Trade War Could Morph Into Full-Blown Currency War By


Markets Fear U.S.-China Trade War Could Morph Into Full-Blown Currency War By


By Jesse Cohen – Market focus remained largely attuned to the next potential steps in the U.S.-China trade dispute as investors feared that ongoing weakness in China’s yuan would expand the scope of the trade war to include currencies.

China’s central bank set the official midpoint reference rate for the yuan at per dollar on Tuesday.

It was the fourth consecutive session where the People’s Bank of China set the figure at a level weaker than the psychologically important 7-dollar level.

The yuan depreciated past the symbolic 7-dollar mark last week for the first time since the 2008 Global Financial Crisis.

That prompted Washington to label China a currency manipulator for the first time since 1994, sharply escalating the ongoing dispute between the world’s two largest economies.

Several investors viewed the move in the Chinese currency as a direct response to Trump’s latest threat to slap fresh tariffs on an additional $300 billion in Chinese goods starting Sept. 1.

The ongoing weakness in the yuan has prompted speculation that policymakers in Beijing are allowing their currency to weaken in order to boost exports and offset the impact of U.S. tariffs.

U.S. President Donald Trump said last week he was not ready to make a deal with China, pouring cold water on any hopes that the dispute would end soon.

Tensions between the two economic superpowers have dominated headlines for more than a year, with both sides imposing tit-for-tat tariffs on each other’s products.

The standoff has raised concern in the market about a potential slowdown in global economic growth.

The U.S. and China will resume trade negotiations in Washington in early September.

U.S. President Donald Trump complained about the strength of the dollar on Twitter last week, once again blaming the Federal Reserve, which he has repeatedly accused of not cutting interest rates fast enough.

The comments raised concern that the risk of intervention to weaken the dollar was growing.

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Reuters contributed to this report

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