Commodities markets suffered another blow Monday as China’s currency tumbled against the U.S. dollar, reducing the purchasing power of the biggest buyer of everything from oil to copper to soybeans.

In the latest escalation of the trade war roiling global markets, China allowed the yuan to breach 7 per dollar for the first time since 2008. Nearly all major global commodities are priced in U.S. dollars, so a weaker currency means an importer can buy less with the same amount of local money. Crude, industrial metals and crops all dropped.

“The move through the 7-yuan-per-dollar psychological level is a big factor today,” said Andrew Driscoll, head of resources research at CLSA Ltd. “No question that the escalation in trade tensions is weighing significantly on sentiment and the demand outlook for commodities.”

Commodities have suffered during U.S. President Donald Trump’s trade war on China, mostly on expectations global economic growth will slow, which saps demand for raw materials. Tensions escalated after his surprise announcement last week to slap an additional slap 10% levy on $300 billion of Chinese goods.

Losses were led by iron ore on the Singapore Exchange. Brent crude on ICE Futures Europe lost as much as 1.6%, as did copper on the London Metal Exchange.

Gold bucked the trend as investors sought safety in precious metal. Spot prices gained as much as 1.6% to $1,463.58 an ounce, the highest in since May 2013.

As well letting the currency slide, the Chinese government has asked its state-owned enterprises to suspend imports of U.S. agricultural products, according to people familiar with the situation. That sent corn futures on the Chicago Board of Trade down as much as 2.1%, and soybeans by as much as 1.4%.

‘Ominous Signal’
China is the world’s biggest buyer of commodities, importing more than $500 billion of metals, energy and agricultural goods in 2017, according to the Massachusetts Institute of Technology’s Observatory of Economic Complexity. About 63% of global iron ore shipments go to China, along with 63% of soybean trade and 43% of copper ore imports, it estimated. China in 2017 surpassed the U.S. as the world’s largest oil importer.

"It makes importing commodities more expensive for the Chinese, that much is certain,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “It sends an ominous signal to the market that the trade war is taking a turn for the worse.”

Still, the impact of a weaker yuan on Chinese purchases is seen possibly mitigated by lower prices for many commodities. Brent, for example, is down 17% in the past year amid fears that the U.S. shale boom has created a global supply glut.

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