Investors are bracing themselves for China’s currency to slump to Rmb7 against the dollar, an “important psychological marker” of weakness, as trade tension with the US mounts and the country’s economic fundamentals soften.

The onshore renminbi has dropped by more than 10 per cent from its high this year in March, to Rmb6.923 against the greenback, as trade talks with the US deteriorated and the threat of tariffs on imports from both countries escalated.

The currency came under further pressure after China’s central bank on Sunday cut domestic banks’ reserve requirements to inject a net Rmb750bn ($109bn) into the financial system. The renminbi slumped 0.9 per cent when markets opened on Monday after a week-long national holiday — its worst one-day fall since February.