Given recent action, I’d say China thought about drawing a hard line on USD/CNY somewhere near 7.00, but market fundamentals have made it difficult to really pin down the price action. The dollar is going wild amid a more hawkish Fed and there are still big concerns about China’s economic outlook, which is not really helping the currency.
The latest PBOC fixings also point to further weakness in the currency, although it has yet to officially break above the 7.00 mark. The USD/CNY fix was seen today at 6.9920.
What will be interesting is that it now looks like we could see the yuan drop further to test the lows (highs for USD/CNY) of September 2019 and May 2020 closing around 7.15 at 7.18. A break above will see the yuan fall to its lowest level since China opted to abandon its old peg to the dollar and revalue the currency.
While markets may be focused on other major events and moves this week, the continued depreciation of the yuan is also a notable development worthy of attention. In turn, that just provides another tailwind for the dollar in the grand scheme of things.