A day after American farm groups showed signs of losing patience with Donald Trump's trade war with China, the president hinted at more aid beyond the US$28 billion so far announced if the spat lingers.
It acted after China chose to let the yuan fall below the key seven-per-dollar level for the first time in more than a decade, rattling financial markets and dimming hopes for an end to a trade war that has dragged into a second year.
Beijing has previously sought to prevent the currency from slipping below the symbolic level.
Global stock markets were left reeling as the trade war between the United States and China escalated yet again.
When the U.S. Congress first enacted a currency review law in 1988, there were few global forums for resolving such disputes, well before the launch of the World Trade Organization.
"China is not really trying to dramatically weaken its currency".
The Chinese government on Monday asked state-owned firms to stop their purchasing U.S. farm products, according to Xinhua state agency.
Unlike other central banks, the PBOC is not independent and faces claims of interference when big moves occur in its value.
The People's Bank of China sets the exchange rate each morning and allows the yuan to fluctuate by 2% against the dollar during the day.
What is the impact of a weaker yuan?.
At the time of reporting, one yuan was equivalent to US$0.14. A second major study confirms that the 2018 tariffs were completely passed through to higher prices for American importers. Evans-Pritchard explained that China is unlikely to engage in talks with the International Monetary Fund, and thus, the U.S.
Have they done this before?.
Beijing ordered a halt on purchases of USA agricultural exports in response, in a move that could hurt a key Trump constituency, American farmers.
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"In a statement likely to anger Trump, the PBOC has explicitly linked today's devaluation with the renewed tariff threat made by the U.S. last week".
Why has it angered the US?
Trump's decision to slap new tariffs on around £250billion of Chinese goods last week provoked fury in Beijing.
Trump had earlier declared China's currency move to be "a major violation", and analysts said it is likely the White House pressured the Treasury Department to issue the designation.
PBOC Governor Yi Gang said on Monday China "China would "refrain from competitive devaluations, and will not target exchange rate for competitive purposes"". It was accused of manipulating currency for the first time in 1994.
China's official Communist Party newspaper said on Tuesday the United States was "deliberately destroying global order", a day after Washington branded Beijing a currency manipulator in a rapidly escalating trade dispute.
A country does so by artificially inflating or deflating its exchange rate.
Chinese leaders have promised to avoid "competitive devaluation" to boost exports by making them less expensive overseas.
"Renminbi weakening pressure added uncertainty to the stock market and added pressure especially for financials and property companies", said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. "China has a long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market", the department stated Monday.
What's next for the yuan?.
Wall Street was quick to react to Monday's sharp depreciation, with currency analysts rushing to cut their yuan targets. It said the yuan's decline was driven by market forces.
The yuan has lost five per cent against the dollar since hitting a high in February of 6.6862 to the dollar.