Illustration photo of U.S. Dollar and China Yuan notes
Illustration photo of U.S. Dollar and China Yuan notes. REUTERS/Thomas White/Illustration

The official rate of the renminbi (yuan) was on Monday set to a new low of 11 years by People's Bank of China (PBOC) after the US and China on September 1 put new tariffs on each other's goods following a trade war that started last year.

The Chinese bank set the midpoint rate at 7.0883 per dollar before the market open on Monday. The new rate, only 4 pips (points in percentage) weaker than the previous fix of 7.0879, is the weakest since March 13, 2008.

The guidance rate was however stronger than markets had expected for the fifth straight session.

The PBOC has persistently set its official fixing above the 7.1 per dollar level, which traders are interpreting as an official attempt to slow the yuan's decline.

Monday's fall was the biggest monthly loss of the Chinese currency in 25 years in August as the trade dispute intensified with Washington.

The fluctuation limit that PBOC fixes against the dollar by setting a daily benchmark rate and allowing yuan to trade within a 2 percent range on either side is aimed at balancing actual forex market trends and to guard against the precipitous swings in Beijing's capital markets.

A weaker yuan helps China deal with the blow of US President Donald Trump's escalating trade tariffs imposed to pressurize Beijing to change what Washington considers "unfair trade practices".

Trump had last month accused China of weaponizing the yuan after it slipped past the key level of 7.0 to the dollar. He had labeled Beijing a "currency manipulator".

The latest move comes as the United States on Sunday imposed fresh 15 percent tariffs on a variety of Chinese goods, including footwear, smart watches and flat-panel televisions.

China also imposed new retaliatory duties on US crude in the trade dispute going on since last year between the world's two largest economies.

Washington has $419 billion of trade deficit with Beijing as of January this year. The US exports to China were only $120 billion while imports were $540 billion.