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The currency war has arrived.

So say some of the best and brightest in the $5.1 trillion-per-day foreign-exchange market. U.S. President Donald Trump took to Twitter Friday to accuse China and the European Union of “manipulating their currencies and interest rates lower.” The comments came after the yuan on Friday plunged past 6.80 per dollar for the first time in a year and as the nation’s central bank shows little sign of intervening to stem the slide.

As the world’s two largest economies open up a new front in their increasingly acrimonious game of brinkmanship, the consequences could be dire — and ripple far beyond the U.S. and Chinese currencies. Everything from equities to oil to emerging-market assets are in danger of becoming collateral damage as Beijing and Washington threaten the current global financial order.

“The real risk is that we have broad-based unravelling of global trade and currency cooperation, and that is not going to be pretty,” said Jens Nordvig, Wall Street’s top-ranked currency strategist for five years running before founding Exante Data LLC in 2016. “Trump’s rhetoric over the last 24 hours is certainly shifting this from a trade war to a currency war.”

China’s shock devaluation of the yuan in 2015 provides a good template for what the contagion might look like, according to Robin Brooks, the chief economist at the Institute of International Finance and the former head currency strategist at Goldman Sachs Group Inc. Risk assets and oil prices would likely tumble as worries about growth arise, hitting currencies of commodity-exporting countries particularly hard — namely, the Russian ruble, Colombian peso and Malaysian ringgit — before taking down the rest of Asia.

“Asian central banks will initially try to stem currency weakness through intervention,” Brooks said. “But then Asian central banks will step back, and in my mind, the big underperformer on a six-month horizon could be EM Asia.”

Whether the People’s Bank of China attempts to anchor the dollar-yuan exchange rate near 6.80 to avoid further escalation is key, according to Nordvig. He says European Central Bank President Mario Draghi may elect to step into the fray at the ECB’s July 26 policy meeting, given American attempts to talk the dollar down in January were extremely unpopular in Frankfurt.

The Bloomberg Dollar Spot Index fell as much as 0.8 percent Friday, the most since March. The euro was up 0.8 percent to $1.1730 as of 2:14 p.m. New York time, while the yen was 0.9 percent stronger.

The Treasury Department declined to comment when asked whether the U.S. was entering a currency war.

The greenback will likely continue to suffer as investors heed Trump and back out of long dollar wagers, according to Shahab Jalinoos, Credit Suisse Group AG’s global head of FX trading strategy. Hedge funds and other speculators are the most bullish on the currency in over a year, according to the latest data from the Commodity Futures Trading Commission.

“It has now been virtually defined as a currency war by the U.S. president, given that he explicitly suggested foreign countries are manipulating exchange rates for competitive purposes,” Jalinoos said. “The barrage of commentary will likely force the market to scale back long dollar positions.”

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