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The yuan plunged beyond 7 per dollar for the first time since 2008 amid speculation Beijing was allowing currency depreciation to counter President Donald Trump’s latest tariff threat.

The exchange rate tumbled 1.3% to 7.0344 a dollar at 4:45 p.m. local time after the People’s Bank of China set its daily reference rate at a weaker level than 6.9 for the first time since December. The offshore yuan sank as much as 1.9% to a record low, while the Shanghai Composite Index closed 1.6% lower.

The yuan declined 0.9% in mainland trading last week, its biggest loss since mid-May, after President Donald Trump abruptly escalated the trade war with new tariffs on Chinese goods. Beijing pledged to respond if the U.S. goes ahead with a plan to impose a 10% tariff on a further $300 billion in Chinese imports.

“It appears that the tariffs hike suggests the return of tit-for-tat moves and a suspension of trade talks, and the PBOC sees no need to keep the yuan stable in the near term,” said Ken Cheung, a senior currency strategist at Mizuho Bank Ltd.

The tumble exacerbated losses in Asia’s financial markets. The MSCI Asia Pacific Index dropped 2%, while the MSCI Hong Kong Index slid for a ninth day as protesters moved to shut down the city with a general strike.

“Now that 7.0 has been broken both onshore and offshore, it may be deemed to be part of the response to the new tariffs,” said Christy Tan, head of markets strategy at National Australia Bank Ltd. in Singapore. "The authorities may only step in to manage if it gets disorderly, such as a sustained spike in volatility, herd behavior across spot, forward, option trading and so on.”