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The US dollar is in freefall after fears that China is tightening its control over the yuan, triggering a rally in US stocks.

The slide in the greenback hit US stock markets on Thursday as investors piled into bonds, futures and other financial assets.

The Dow Jones Industrial Average plunged by 24.16 points, or 0.4 per cent, to 19,834.63.

The S&P 500 was up 0.8 per cent at 2,927.70.

US Treasury Secretary Jack Lew said in a speech on Wednesday that China was increasingly controlling the yuan’s value.

“We are seeing an increasingly tighter grip on the value of the yuan,” he said.

This is creating pressure for foreign currencies to fall. “

China is now effectively controlling the currency value of its exports.

The yuan has lost value against the greenbacks since Mr Trump took office in January. “

It’s making foreign currencies less competitive.”

The yuan has lost value against the greenbacks since Mr Trump took office in January.

The dollar fell by about 5 per cent on Wednesday, to $1.1477.80 from a low of $1,1957.50.

In an interview on Fox Business Network, Mr Lew said China’s tightening grip on its currency was driving US inflation to unprecedented highs.

“What I see is a concerted effort by China to try to drive down the value and the purchasing power of the dollar, and in doing so it is also trying to drive up inflation and to force US businesses to move their operations abroad,” Mr Lew told the network.

“And this has been happening for some time.”

China’s currency control is widely seen as a key tool in its push to create a more stable world currency.

US officials have repeatedly warned that the Chinese Communist Party would impose further restrictions on foreign trade if the dollar weakened.

“I think you’re seeing a very aggressive effort by Beijing to try and drive down this value, which is really pushing up the inflation rate,” Mr Trump said on Wednesday.

“You’re going to see a lot more of it.

I think it’s going to be a big problem.”

The dollar was up about 0.5 per cent against the Japanese yen against the Australian dollar in early trade.

The Asian Development Bank said China has been slowing the pace of economic reforms, but its currency controls were not affecting the global economy.

The ADB also said China had reduced the share of exports in its gross domestic product to a record low in June, a sign that it was seeking to improve its export performance.

“The Chinese economy remains resilient to shocks,” it said in its latest China-focused update.