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'Like a tsunami is coming': China's move a slap in the face for Trump

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China has hit back at the Trump administration with a drastic exchange rate devaluation, almost guaranteeing a superpower showdown and a lurch towards full trade war.

The yuan blew through the symbolic line of seven to the US dollar for the first time since the global financial crisis, with the offshore rate in Hong Kong spiking to 7.07 in moves that stunned seasoned traders.

The calculated action by the People's Bank (PBOC) threatens to unleash a wave of deflation across the world and risks pushing East Asia and much of Europe into recession. It is certain to provoke a ferocious response from the White House.

Traders on the floor of the New York Stock Exchange on Monday. China's drastic retaliation in the trade war has sent financial markets reeling.Credit:Bloomberg

Capital Economics said Beijing has taken the fateful step of "weaponising" its exchange rate and is digging in for a long struggle. "The fact that they have now stopped defending 7 against the dollar suggests that they have all but abandoned hopes for a trade deal with the US," it said.

Commerzbank said China's decision to engineer such a sudden move in its tightly-managed currency has far-reaching implications........

© Brisbane Times