The Chinese yuan is headed towards 7.00 per dollar as local authorities continue to play down its significance
It's all part of the game and China has seemingly decided that its currency falling to 7.00 per dollar isn't a critical threshold that would see capital outflows just yet. The way I see it is that local authorities have played their cards well with this regard by helping to "ease" and "comfort" markets as we approach the key level.
As the dollar kept gaining against the yuan, the initial reaction was that this is going to be a major level that China will defend and investors were worried if it does start to run away. But China has slowly downplayed its significance and essentially helped to breed investor confidence while allowing its currency to still fall further for the time being.
However, if we do reach the now "not-so-pivotal" 7.00 threshold, don't expect it to go unnoticed in Washington. Mnuchin already voiced out the US' opinion on the matter earlier today here and the message will only grow more intense if the yuan continues to fall against the dollar over the next few weeks/months.
In some ways, the further that the Chinese yuan runs away to the downside after the 7.00 level against the dollar - if and when it does come to that, it could also be seen as the further China is prepared to make a trade deal with the US. Right now, we're on the verge of telling where that conviction stands.
