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President Donald Trump renewed his pressure on the U.S. Federal Reserve Tuesday, calling on the central bank to "match" planned rate cuts from the People's Bank of China as he continues to advance rhetoric in the ongoing trade war between Washington and Beijing.

Trump's Tweet, his eleventh of the morning, suggested the Fed should mirror any move by China's central bank to stimulate the economy if it continues to slow amid the ongoing dispute with the United States. Last week, Vice Premier Liu He, who also leads China's trade negotiating team, said the government was looking at tax cuts to further support the economy.

"We think these fiscal measures will be combined with more targeted monetary easing," said ING economist Iris Pang. "The increase in liquidity will put downward pressure on interbank interest rates."

China's yuan was a notable mover during the overnight session as it fell to a 2019 low of 6.8933 against the U.S. dollar amid speculation that authorities may use the currency as a tool in the trade war, allowing it to weaken in order to lower the price of exported goods and offset tariff increases.

Asia stocks reacted in kind, with Japan's Nikkei 225 falling for a sixth consecutive session to close at a three-month low of 21,067.23 points. China stocks were active again today, with the Shanghai Composite closing 0.67% lower on the session amid signs of buying from government-backed agencies supporting prices.

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"We think that yuan depreciation is not the answer to boost exports. If export orders fall as a result of tariffs, a small depreciation of the yuan will not help," said Pang.

"In fact, if the yuan depreciates further in a short period of time, it will fuel concerns of capital flight," she added. "The central bank wants to prevent this from happening, mainly through stabilising the daily fixing of the exchange rate, so as to send a signal to both onshore and offshore markets that the yuan is stable."

The dollar index, which tracks the greenback against a basket of six global currencies, was 0.15% stronger at 97.48 during the European session, while benchmark 10-year Treasury note yields added 1 basis point to trade at 2.412% as equity sentiment shifted to a more positive outlook.

China's $1.3 trillion holding of U.S. Treasury bonds, however, presents another headache for investors in a protracted trade war, given rising speculation that Beijing could either cease buying new bonds with the dollar it receives from U.S. trade ($21 billion last month alone) or sell them into the market as a form of tariff retaliation.

The broader impact of a trade-related slowdown in both global and U.S. economic growth is a more pressing concern, however, and is starting to be acknowledged by members of the Federal Reserve, one of which hinted at lower interest rates as a potential counterweight yesterday.

"If the impact of the tariffs - and whatever financial market reaction to those tariffs is - causes more of a slowdown, then we do have the tools available to us, including lower interest rates," Boston Fed President Eric Rosengren told Reuters.

A Bank of America Merrill Lynch survey of Global Fund mangers, however, suggested that the men and women controlling around $687 billion in financial assets around the world don't expect the Fed to step in with lower rates until the S&P 500 falls to as low as 2,305 points, a near 18% slump from last night's closing levels.

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