China's Currency Falls To Lowest Exchange Rate In 11 Years

China's yuan plunged to below 7 per U.S. dollar on Monday morning, the lowest valuation for the currency in 11 years.

The slide in value comes as the U.S. and China remain locked in a trade dispute, leading some analysts to surmise that the devaluation is retaliation for additional U.S. tariffs announced on Chinese goods last week.

"The drop suggests that the central bank of China is willing to weaponize the currency in light of the trade war," says Andrew Collier, managing director of Orient Capital Research in Hong Kong.

A weaker yuan makes China's exports to the rest of the world cheaper and therefore more competitive against those of the U.S. That could encourage rising purchases of Chinese goods in the U.S. and elsewhere and further widen a growing trade deficit with China.

The U.S. trade deficit with China reached a five-month high in June, according to the most recent Commerce Department data.

China's currency fell below 7 yuan to the U.S dollar immediately after China's central bank lowered its daily reference rate Monday morning. This is the exchange rate for yuan set by the central bank each day.