Forex

Chinese Yuan hits a 15-year low on political jitters and weak PBoC fix by Investing.com


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By Ambar Warrick 

Investing.com– China’s yuan hit its weakest level in nearly 15 years on Tuesday, while its offshore counterpart hit a new record low on growing concerns that the country’s new political leadership could jeopardize economic growth with anti-business policies. 

The dollar dropped 0.6% to $7.3079, its weakest point since December 2007, while the fell to a new low of $7.37355.

The Chinese currency was also hit by a weaker-than-expected daily midpoint fixing from the People’s Bank of China. According to state-run news agency Xinhua the central bank set the parity price at 7.1668 dollars, 438 pips less than the dollar.  

After President Xi Jinping won a third consecutive term as leader, the yuan suffered further losses in the second session. The yuan was also stacked with loyalists of the Communist Party.

This move raised concerns that the Chinese President would face little opposition to a possible nationalization of corporate interests. This could severely impact foreign capital flows to China. 

Chinese stocks crashed on Monday as Xi’s confirmation also brewed concerns that Beijing will ramp up its efforts to rein in major internet companies, which have been subject to numerous government probes and fines in the past two years. 

Markets were also shaken by an earlier government commitment that it would maintain its zero COVID policy. COVID-linked lockdowns are at the heart of China’s economic slowdown this year. 

The move was in response to data that showed better-than-expected third quarter numbers. However, other economic indicators continue to paint a grim outlook for the Chinese economy. 

China’s improved slightly in September from a sharp fall in August, thanks to better-than-expected . The month saw a slight increase, which suggests a muted demand. 

As Chinese economic growth slows, the yuan has seen a sharp decline in value. The PBoC is trying to balance the need for more stimulus with the need to prevent further weakness in yuan. 

The currency has been also affected by the pressure of rising U.S. rates of interest. 

 

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