China Has a Big Currency Decision to Make

Round numbers tend to matter in markets. So it is that the foreign-exchange community is dominated by one question, which is whether China’s yuan will breach the seven-per-U.S.-dollar level. The question is freighted with history.

The currency steadily appreciated after July 2005, when the Chinese authorities ended the currency’s peg of 8.3 to the dollar that had endured since 1995. It finally strengthened below seven per dollar in 2008 and has stayed there ever since, meaning the yuan has remained relatively strong. It now looks as though that could be about to change: