A brief ceasefire agreed in late June has proved short-lived, after Trump vowed last week to impose a 10% tariff on $300 billion of Chinese imports from September 1, which would extend levies to effectively all of the goods China sells to the United States.
The United States raised tariffs on a large number of Chinese goods in May, after trade negotiations broke down, and Beijing retaliated.
But central bank governor Yi Gang later said China would not engage in "competitive devaluations".
Tensions between the world's two largest economies further intensified this week after the United States officially named China a "currency manipulator" following a sharp drop in the value of the yuan against the U.S. dollar. Citing that the risks of a havoc-scale currency market volatility seemed to be out of sight in a near-term outlook, a senior FX strategist at TD Securities in New York, Mazen Issa said, "Last night fixed over 7 and markets seem to be taking that fairly well, so perhaps some calm is installed in the market at least for the very near term".
The moves by state banks help reduce the supply of dollars that the market can access to short-sell the yuan.
"Looking ahead, exports still look set to remain subdued in the coming quarters as any prop from a weaker renminbi should be overshadowed by further U.S. tariffs and broader external weakness", Julian Evans-Pritchard, senior China Economist at Capital Economics, said in a note yesterday.
But Washington complains an unfairly weak currency makes China's export prices too low and swells its trade surplus.
"Chinese private buyers are not going to be making any USA purchases with a government ban in place", said Dan Basse, president of AgResource Co. They came on top of broader tariffs used by Trump that have hit China and other trading partners such as the EU, Canada and Mexico, on goods including steel and aluminium. "I expect the dollar to fall to 104-103 yen by the end of the year".
This week's declines are a "warning shot to the Trump administration", showing Beijing can weaken the yuan in response to trade pressure, Nariman Beravesh of IHS Markit said in a report.
A US dollar banknote featuring American founding father Benjamin Franklin and a China's yuan banknote featuring late Chinese chairman Mao Zedong are seen among USA and Chinese flags in this illustration picture taken May 20, 2019.
The move was seen by many as retaliation for tariffs recently announced by US President Donald Trump - and markets sold off worldwide on concerns over a trade-war escalation.
"The Chinese government is trying to masquerade the impact that these tariffs are having on the Chinese economy".