China may take further action to curb yuan – former regulator
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SHANGHAI – The Chinese government could take further action if necessary to keep the yuan stable, potentially putting downward pressure on the currency, a former currency regulator said.
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Politicians can increase the flexibility of the yuan, expand the outflow of capital or control the inflow of capital to limit the yuan, which may deviate from short-term economic fundamentals, wrote Guan Tao, global chief economist at BOC International and former State Administration of Foreign Exchange (SAFE) official.
The Chinese government could take further action if necessary to keep the yuan stable, potentially putting downward pressure on the currency, a former currency regulator said. REUTERS / Jason Lee
The yuan is also facing downward pressure from several market factors, including a further strengthening of the dollar index, the shrinking spread between US and Chinese interest rates, and the declining difference in growth between the two economies, Guan wrote in an article published in Shanghai Securities News on Monday.
Guan, who previously headed SAFE’s balance of payments division, said the yuan was already losing momentum, citing declining trading volumes in the interbank foreign exchange market.
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China’s yuan hit a four-year high against the dollar on January 26, and an index that tracks the yuan’s value against a basket of currencies is flirting with the highest level since the end of 2015.
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China has already taken some steps, including instructing financial institutions to keep more currency in reserve, to slow down the rapid strengthening of the yuan.
