Yuan Taps New Low Versus US Dollar as Investors React to Endorsement of Chinese President"s Third-Term Bid
The Chinese yuan’s offshore exchange rate against the U.S. dollar fell to a new all-time low of 7.33:1 just over a day after the conclusion of the Chinese Communist Party’s congress which gave President Xi Jinping the mandate to lead the country for the third time. Concerns over Xi’s unprecedented third term, as well as the reshuffle of his top team, are said to have sparked a sell-off of stocks that wiped billions from the wealth of China’s super rich. Chinese Yuan Has Depreciated by 7% Since Late August
The Chinese currency’s offshore exchange rate versus the U.S. dollar tapped a new all-time low of CN¥7.33:$1 when it fell by 1.5% some 24 hours after the conclusion of the Chinese Communist Party (CCP)’s congress. According to one report, the currency slipped because the CCP congress, which endorsed President Xi Jinping’s bid to lead the country for an unprecedented third term, did not ease investor concerns over the well-being of the world’s second-largest economy.
The offshore unit’s fall to its lowest level in more than a decade also came as the People’s Bank of China (PBOC) reportedly ended its long-running policy of fixing the yuan. In addition, the yuan lost ground versus the greenback on the onshore markets, dropping by 0.6% on October 24 to CN¥7.2648. Since late August 2022, when the exchange rate was around CN¥6.86 per dollar, the yuan has now depreciated by almost 7% versus the dollar.
Similar to other global currencies that have lost ground versus the U.S. dollar in 2022, the yuan has depreciated each time the U.S. Federal Reserve has hiked interest rates. Although the hikes are intended to tame the United States’ rising inflation rate, each round appears to make the dollar stronger. As a result, many currencies including the pound, euro, yen, and the Swiss franc have since tapped record lows versus the greenback.
With analysts predicting another hike by Fed in November, there is an expectation that the yuan will depreciate further against the greenback. This sentiment is backed by a recent Bloomberg study which reportedly found that half of the 30 yuan traders interviewed thought the yuan would eventually drop to CN¥7.5 per dollar.
Stock Sell-off Erodes Wealth of China’s Richest
Meanwhile, another report said President Xi Jinping’s growing grip on the government, which was confirmed by the recently concluded congress, had helped to trigger a sell-off of stocks which saw China’s super rich lose around $9 billion. Commenting on the billionaires’ losses, Kenny Wen, the head of investment strategy at KGI Asia, said: The slump today reflects the fragile investor sentiment. People are just trying to hold on to and look for more implications for the Chinese after the reshuffle.
According to the report, even before the October 24 sell-off, President Xi’s “Zero Covid” policies had already ensured 2022 would be the worst year for China’s wealthiest individuals. Tags in this story “zero-Covid-19” strategy, Kenny Wen, offshore yuan, President Xi Jinping, U.S. Federal Reserve, US Dollar, yuan depreciation
What are your thoughts on this story? Let us know what you think in the comments section below. Terence Zimwara
Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route. Report: US Central Bank Loses Billions From Rate Hikes, "Losses Pile up Into an IOU" ECONOMICS | 5 hours ago Report: Billionaire Says Britain May Be Forced to Seek Bailout From IMF if It Does Not Renegotiate Brexit Deal ECONOMICS | 15 hours ago
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