FOREX-Yuan drops below 7 per dollar as trade war escalates

* Yuan breaks key 7 level against dollar
* Trump calls Chinese currency move "manipulation"
* Yen jumps to seven-month high in scramble for safety

(New throughout, updates trading and comments to U.S. market
open, new byline, changes dateline, previous LONDON)
By Karen Brettell
NEW YORK, Aug 5 (Reuters) - China let its yuan weaken below
7 to the dollar on Monday, an 11-year low, leading to broad risk
aversion on concerns about the escalation of the U.S.-China
trade war.
Fearful of the impact on global growth, investors dumped
export-oriented Asian currencies and rushed into safe havens,
with the Japanese yen surging to a seven-month high.
Chinese authorities, who had been expected to defend the
psychologically important level of 7 per dollar CNY= , allowed
the currency break through the floor to its lowest in the
onshore market since the 2008 global financial crisis.
“We've had a pretty meaningful reaction, where 7 in
particular was a level that the market was very sensitive to in
dollar/CNY. Now that we've broken that, risk appetite has taken
a hit,” said Brian Daingerfield, head of G10 FX strategy for the
Americas at NatWest Markets in Connecticut.
“I think there's a sense that President Trump might try and
escalate in terms of a reaction, if he thinks that this was a
deliberate move by the Chinese to try and weaken their currency
artificially,” Daingerfield said.
The weaker Chinese currency came after Beijing vowed on
Friday to fight back against U.S. President Donald Trump's
decision to impose 10% tariffs on $300 billion of Chinese
imports, ending a month-long trade truce. Trump on Monday called the move in the Chinese currency “a
major violation” and “currency manipulation.” The escalation of the trade dispute has led investors to be
on watch for any U.S. efforts to weaken the greenback, though a
direct intervention is still viewed as unlikely.
Japan's yen, which investors buy in times of risk aversion,
rose to its highest since a January flash crash. The yen was
last up 0.5% at 106.05 JPY= , after hitting 105.80 earlier.
Japan's top currency diplomat, Yoshiki Takeuchi, warned that
Tokyo was ready to intervene if yen gains threatened its
export-reliant economy. The Swiss franc, another safe-haven currency, strengthened
0.86% to 0.9738 francs per dollar CHF= , the strongest since
June 25.
The Australian dollar AUD= , often used as a proxy bet on
China, fell to a seven-month low of $0.6749, before rising back
to $0.6776.

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Currency bid prices at 10:32AM (1432 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1189 $1.1107 +0.74% -2.44% +1.1200 +1.1105
Dollar/Yen JPY= 106.0500 106.5800 -0.50% -3.82% +106.6700 +105.8000
Euro/Yen EURJPY= 118.67 118.39 +0.24% -5.98% +118.7300 +117.7000
Dollar/Swiss CHF= 0.9736 0.9820 -0.86% -0.79% +0.9840 +0.9735
Sterling/Dollar GBP= 1.2161 1.2154 +0.06% -4.67% +1.2188 +1.2102
Dollar/Canadian CAD= 1.3180 1.3204 -0.18% -3.33% +1.3247 +1.3177
Australian/Doll AUD= 0.6776 0.6799 -0.34% -3.87% +0.6804 +0.6749
ar
Euro/Swiss EURCHF= 1.0895 1.0908 -0.12% -3.19% +1.0936 +1.0865
Euro/Sterling EURGBP= 0.9199 0.9136 +0.69% +2.39% +0.9205 +0.9133
NZ Dollar/Dolar NZD= 0.6533 0.6540 -0.11% -2.74% +0.6541 +0.6490
Dollar/Norway NOK= 8.9204 8.9146 +0.07% +3.26% +8.9516 +8.8931
Euro/Norway EURNOK= 9.9837 9.9027 +0.82% +0.76% +9.9905 +9.8924
Dollar/Sweden SEK= 9.6184 9.6348 +0.55% +7.30% +9.6515 +9.6130
Euro/Sweden EURSEK= 10.7640 10.7053 +0.55% +4.88% +10.7722 +10.6928