FOREX-China's yuan goes through 7 to the dollar to an 11-year low

* Trump's tariff threats last week shake FX markets
* Yuan set for biggest one-day loss since 2015
* Yen jumps to seven-month high in scramble for safety
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, Aug 5 (Reuters) - China let its yuan weaken below 7
yuan per dollar on Monday, an 11-year low, as the escalation in
the U.S.-China trade war shook currency markets.
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=CFXS ,
allowed the currency break thought the floor to its lowest in
the onshore market since the 2008 global financial crisis.
In offshore markets, the yuan CNH=EBS fell to its weakest
since international trading of the Chinese currency began. The
currency was headed for its biggest one-day drop in four years.
It was last down 1.4% at 7.0744 in offshore markets.
The fall 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. "The fallout has been most evident in the Asia region," MUFG
analyst Derek Halpenny said. "We certainly expect to see general
FX volatility increase in the coming days with daily PBOC
(People's Bank of China) CNY fixes an important focus each day."
The currencies of other Asian economies are closely linked
with China's growth prospects also dropped. The Korean won
KRW= fell 1.4% against the dollar, on course for its biggest
one-day loss since August 2016. The new Taiwan dollar fell more
than 0.7% TWD= .
The Australian dollar, often used as a proxy bet on China,
shed as much as 0.5% to $0.6748 AUD=D4 , a seven-month low.
Japan's yen, which investors buy in times of risk aversion,
rose 0.7% to its highest since a January flash crash. The yen
was last up 0.7% at 105.89 JPY=EBS , after hitting 105.78
earlier.
Japan's top currency diplomat, Yoshiki Takeuchi, warned that
Tokyo was ready to intervene if yen gains threatened its
export-reliant economy. The U.S. dollar edged lower against a basket of currencies,
down 0.1% at 98.032 .DXY . Against the euro the dollar slipped
to $1.111 EUR=EBS .
Analysts said Trump, who has repeatedly called for a weaker
dollar in 2019, was unlikely to ignore the yuan's depreciation.
"There is also a risk later that President Trump responds to
7+ levels in $/CNY by claiming that China is playing a ‘big
currency manipulation game'. This may extend to a threat to
weaken the dollar, which will only encourage short positions in
USD/JPY and a pick-up in traded volatility prices," ING analysts
said.
The Swiss franc, another safe-haven currency, strengthened
0.2% to 1.0883 francs per euro EURCHF=EBS , a two-year high.
Sterling fell again after media speculation over the weekend
that Prime Minister Boris Johnson was preparing for a general
election. The pound shed 0.5% to $1.2105 GBP=D3 , not far from
its two-year low of $1.2080 touched last week. It was 0.5%
weaker against the euro at 91.84 pence EURGBP=D3 .