A new Asian currency war and a delayed Federal Reserve rate hike; these are the potential market-shaking implications of Beijing's decision to devalue the yuan, strategists told CNBC.

"If they are true to their word today and this is a new regime for the fixed mechanism, we might think about using the word 'floating' associated with the Chinese exchange rate-that's a massive change," noted Richard Yetsenga, head of global markets research at ANZ, referring to Tuesday's announcement by the People's Bank of China to allow the yuan to depreciate as much as 2 percent against the U.S. dollar.

Read More China central bank shocks with yuan devaluation

The move took global traders by surprise, with many pointing to weak July trade data, the recent stock market rout's spillover impact on consumption, and aspirations for inclusion into the International Monetary Fund's Special Drawing Rights basket as factors motivating Beijing.

"It's an interesting move which means several things: when the People's Bank of China first started lowering interest rates and reserve requirements, that freed up bank lending, which likely went to stocks. Now this yuan re-engineering will help companies that represent the greater economy, i.e. exporters, not just companies heavily weighted in stock markets," explained Nicholas Teo, market analyst at CMC Markets.

China may be focused on becoming more market-oriented, but Tuesday's announcement is the latest in a series of competitive devaluations in Asia and other emerging markets, traders said.

"Clearly, this is a shock to the rest of Asia. If you look at China's top trading partners-Korea, Japan, the U.S. and Germany-this is a competitive hit to the exports of those countries. China is exporting disinflation to countries who receive Chinese exports. This is especially negative for Asia currencies," noted Callum Henderson, global head of FX Research at Standard Chartered.

Indeed, the region's reaction to Tuesday's announcement was swift and severe. As the yuan tumbled as much as 1.8 percent against the greenback, the Korean won (Exchange:KRW=) (KRW), Singapore dollar (Exchange:SGD=) (SGD), and Australian dollar (Unknown:AUDUSD=) all sank more than 1 percent.

"Asian currencies are already facing pressure from the expected imminent Fed rate hike and strong greenback. A likely weaker yuan (CNY) will act as another source of pressure on regional currencies with their sensitivity to CNY movements likely to rise..We think the SGD, KRW, and Taiwan dollar are the most at risk among Asian currencies from a potentially weaker CNY in the months ahead," Barclays said in a report on Tuesday.