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China's central bank will not allow the currency to exceed 7 yuan against the dollar

Three sources familiar with the work of the central bank of China said the bank would intervene in foreign exchange and fiscal policy instruments to prevent the yuan from falling below 7 yuan against the dollar in the near future.
"At the moment, you can be sure that he (the central bank) will not allow him to pass 7," a source told Reuters.
China's currency protection of 7 yuan against the dollar will strengthen currency confidence and ease investors' concerns about the sharp decline in the yuan, although deteriorating trade ties with Washington makes a competitive currency devaluation urgent for Beijing.
"The break of 7 against the dollar will be beneficial to China because it will be able to reduce some of the consequences of tariff increases, but the result will be negative for the yuan's confidence and the money will flow abroad," the source said.
Yuan fell to its lowest level since December, approaching the $ 7 barrier that hit the last time during the financial crisis in 2008.
Yuan dropped 3 percent last month, as hopes for a long-term trade-war deal between Beijing and Washington have fallen. The latest round of these tensions broke out with US President Donald Trump's decision to impose tariff increases for Chinese imports, which triggered a similar reaction from China.

Although yuan weakness will help Chinese exporters, depreciation should be significant to offset the impact of US tariffs. Policy insiders say that such a downturn can in turn lead to capital flight and undermining China's economic stability.

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