China's yuan falls to lowest level in a decade

The yuan weakened sharply after the People's Bank of China set its daily reference rate for the currency at 6.9225, the lowest rate since December. China's central bank sets a "band" every day within which the yuan's value is only allowed to move 2% up or down.

In mainland China, one US dollar now buys about 7.0188 yuan. In trading outside of China, where the yuan moves more freely, the yuan stands at 7.1114 to the dollar — a record low in the offshore market.

The symbolically important benchmark of 7 was last crossed during the 2008 financial crisis.

The market took the Chinese central bank's decision to lower the fixing rate that much as a "message of intent" to US President Donald Trump, said Chris Weston, head of research at Pepperstone Group, in a research note.

He added that the yuan's depreciation will trigger fears about capital flight from China, along with a subsequent tightening of financial conditions in the Chinese economy.

Markets across Asia also tumbled in early trading. In Hong Kong, where protest leaders called on people to participate in strikes across the city, the Hang Seng Index (HSI) fell as much as 3.1%, the biggest drop since October.

Japan's Nikkei dropped 2.4% and South Korea's Kospi (KOSPI) lost 2.2%.

The Shanghai Composite Index (SHCOMP) fell 0.8%. Australia's S&P/ASX 200 fell 1.5%, and Taiwan's Taiex moved down 1.1%.

"Risk aversion had certainly been the latest theme for markets, one to weigh on both Asia equities and currencies," said Jingyi Pan, a market strategist for IG Group. "Trade jitters linger for Asia markets going into the fresh week."

US President Donald Trump ratcheted up his country's trade war with China last week when he announced plans Friday to slap a 10% tariff on $300 billion worth of goods. That means effectively all Chinese exports to the United States will soon be taxed.

Beijing, meanwhile, said it was ready for a fight.

Here are some of the other big moves on Asian markets at 11:30 a.m. Hong Kong time.

HSBC shares that are listed in Hong Kong dropped 1.6% after the British banking giant announced John Flint will step down as chief executive. HSBC said a change was needed because of an "increasingly complex and challenging global environment."
Hang Seng Bank, a unit of HSBC and one of Hong Kong's largest lenders, tumbled 4.4%. In an earnings report, the bank cited a "a challenging operating environment" and slowing economic growth in the city. It forecasted full-year GDP growth for Hong Kong to reach between 1% and 1.5%, down from from last year's 3%. "Downshifts in retail sales and trade growth signal that the economic environment will remain challenging," the bank said.
Last week, the S&P 500 index (INX) and the Nasdaq Composite Index (COMP) both posted the worst week for the year, down 3.1% and 3.9% respectively. The Dow Jones Industrial Average (DJIEW) was down 2.6% for the week.