Chinese yuan banknotes in a branch of the Industrial and Commercial Bank of China.
VCG | Visual China Group | Getty Images
The Chinese yuan crossed a closely monitored barrier to the dollar on Monday following another escalation in the Beijing-Washington trade war.
In the afternoon after Asian trading hours, the Chinese yuan on land exchanged hands at 7.0304 against the dollar, while the offshore yuan traded at 7.0807 against the greenback. The Chinese currency last broke the 7-point against the dollar during the global financial crisis in 2008, according to Reuters.
The sharp depreciation of the Chinese currency came after US President Donald Trump unexpectedly announced new tariffs on Beijing last week which are set to take effect from September 1
"I think this is clearly a retaliation that China has recently refrained from doing," Claudio Piron, co-head of Asia exchange rate and currency strategy at Bank of America Merrill Lynch Global Research, told CNBC's "Street Signs ”on Monday.
In response to Trump's move, China's foreign ministry said on Friday that the country does not want a trade war with the United States, but is not afraid to fight one.
The United States and China have been locked in a trade war that has lasted more than a year, with tariffs being placed on billions of dollars of each other's goods. The protracted controversy has stoked market sentiment and raised concerns about the outlook for the global economy.
On Monday, the Chinese central bank set the yuan's midpoint at 6.9225 against the dollar – the weakest level since December 2018, according to Reuters.
Piron said that it was Monday's midpoint fortification of the People's Bank of China that probably "drove" the Chinese currency lower. "The message is: The blessing was finally given by the fix," he said.
The move to place the fix "significantly" above 6.9 shows that China "likes to have control over the situation," Piron said.  For its part, the Chinese central bank said on Monday that it is confident of initially holding the yuan stable. In a statement published on its website, the central bank largely attributed the losses in the yuan to trade protectionism and tariffs on Chinese goods.
Yuan Looking Forward
Economists who spoke with CNBC generally advised investors to wait and see further developments on the Chinese yuan's movements.
"As long as it is a one-time relationship and everyone sees it as credible, it's okay," David Mann, global chief economist at Standard Chartered Bank, told CNBC's "Squawk Box" on Monday.
"That's the critical part," Mann said. "(If) it is considered credible, then you will not get as much of the outflow headache, and you will not necessarily get a continuous response from other currencies in response."
"What we really want to keep an eye on … is how this is then interpreted by the United States because Trump can always come back with their currency intervention oblique to this," said Vishnu Varathan, chief financial and strategy officer at Mizuho Bank , to CNBC Monday.
While Trump has previously accused China of manipulating its currency, his administration has refrained from labeling the country a currency manipulator.
Bank of America Merrill Lynch's Piron said there are several "revenues" being discussed in the United States on the topic of foreign exchange depreciation – such as "attempts by congressmen to pass other bills through Congress … to ask for a weakening of the dollar . "
Such an attempt would be largely futile, he said: "If we go for currency war and we all try to write off, it's a kind of zero-sum game."
– Reuters contributed to this report.