China’s major state-owned banks intervened in favour of the domestic currency during Wednesday’s trading. The yuan is the weakest since December 2007. This may be one of the consequences of Xi Jinping’s re-election as head of the Communist Party.
Currency influenced by the Chinese Communist Party Congress
The Chinese yuan has faced a fairly massive sell-off in recent days. Although the Chinese economy grew more than expected in the third quarter, investors seem to have been negatively affected by the outcome of the Chinese Communist Party Congress, which re-elected the current President and General Secretary Xi Jinping as its leader.
The impact of negative relations between China and the United States
Investors are concerned that there will be a hardening of the Chinese regime and the continuation of a kind of trade war between China and the United States. The tightening policy of the US central bank has undoubtedly contributed to the depreciation of the yuan. Moreover, the latter is due to meet next week and decide on the next interest rate setting, which is likely to go up sharply again.
Chinese state-owned banks therefore sold US dollars massively on Wednesday, with which they bought domestic currency. The yuan rebounded from its 15-year lows to strengthen slightly to below 7.30 yuan per dollar.