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The big reason China won’t let the yuan go into free fall against the dollar has to do with Japan and Europe

Houze Song
The big reason China won’t let the yuan go into free fall against the dollar has to do with Japan and Europe

When China’s currency depreciation breached the psychological threshold of 7 yuan to the dollar this week, stock markets both fretted over a replay of the disorderly depreciation in 2015-2016 and feared that the yuan has become a retaliatory tool in Beijing’s trade war arsenal. In fact, the Chinese currency (USDCNY) isn’t likely to experience anything like a free fall in the coming months because worries about the response from EU and Japan will dictate policy makers to show restraint.