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The Chinese central bank will not allow the currency to exceed 7 yuan against the dollar

Three sources familiar with the work of the Chinese central bank said the bank would intervene in the foreign exchange market and fiscal policy tools to prevent the yuan from falling below 7 yuan against the important dollar in the near future.
"At the moment, you can be sure that he (the central bank) will not let him break the 7," a source told Reuters.
Defending the Chinese currency at 7 yuan against the dollar will boost currency confidence and ease investor concerns about the sharp depreciation of the yuan, although deteriorating trade relations with Washington make competitive devaluations an urgent choice for Beijing.
"The 7 breakthrough against the dollar will benefit China because it will be able to reduce some of the impact of the rate increase, but the results will be negative for the yuan's trust and money will flow abroad," said the source.
The yuan fell to its lowest level since December, approaching the 7-dollar barrier that was touched last time during the 2008 financial crisis.
The yuan fell 3 percent last month as hopes of reaching an agreement on a long-term trade war between Beijing and Washington receded. The latest round of tension erupted with US President Donald Trump's decision to impose a rate increase on Chinese imports, triggering a similar reaction from China.

Although the yuan's weakness will help support Chinese exporters, the devaluation must be significant to offset the impact of rising US tariffs. People in policy say such a decline in turn can trigger capital outflows and damage China's economic stability.

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