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The weakened Chinese currency to the U.S. dollar on late Sunday shows that the world's second-largest economy's leaders "have all but abandoned hopes for a trade deal with the U.S.," wrote Julian Evans-Pritchard, a senior China economist with Capital Economics, in a note late Sunday.

The renminbi weakened beyond 7 to the dollar for the first time since the world's financial crisis in 2008 on late Sunday time ET, or early morning in the Asian nation. The higher the number to the dollar, the weaker the Chinese currency.

While the People's Bank of China officials "had repeatedly argued that this level is arbitrary, they had previously intervened to prevent the currency from breaching this threshold, no doubt mindful of the headlines it would attract," wrote Evans-Pritchard in the note, adding that "we think they were holding back in order to avoid derailing trade negotiations with the US. The fact that they have now stopped defending 7.00 against the dollar suggests that they have all but abandoned hopes for a trade deal with the US."

Late last week, President Donald Trump said he would move forward with new 10% tariffs on $300 billion in Chinese imports by September. 

The Bank of China blamed the devaluation partly on the tariff threat, and, "In doing so, the PBOC has effectively weaponised the exchange rate, even if it is not proactively weakening the currency with direct FX intervention," wrote the analyst.

But a senior currency analyst at MUFG Bank told the Nikkei Asian Review that while the "impact of U.S.-China trade is turning out to be very big ... looking at the mid-point, the People's Bank of China is trying to stem the yuan's fall."

"The PBOC doesn't look like it is trying to use a weaker yuan to counter U.S. trade pressure. The yuan's fall seems to be stemming from panicky selling," Masashi Hashimoto told the publication.

Asian markets were falling later, with the largest declines on the Hang Seng, which was down 2.89% and the Nikkei, 2.27%.