[BEIJING] The Chinese yuan will appreciate against the US dollar in the longer-term, a central bank adviser said, arguing that recent weakness in the currency is largely due to a stronger US dollar.
The Chinese economy is showing signs of recovery, and if 2016 is the low point in the current economic cycle there is no force to drive further depreciation of the yuan, Fan Gang wrote in an editorial in financial newspaper China Business News on Tuesday.
Mr Fan said that considering China will grow almost twice as fast as the United States, and that China's inflation will be less than that of the US, "the long-term trend of the yuan versus the dollar is for steady and slow appreciation".
The yuan plumbed 8-1/2-year lows against the US dollar last week and other emerging market currencies also fell as the greenback surged following Donald Trump's surprise victory in the Nov 8 US presidential election.
The US dollar's sharp gain and expectations of higher US interest rates have sparked worries about capital outflows, and sent many analysts hurrying to downgrade their yuan forecasts.
Goldman Sachs said last week that it was revising its 12-month yuan forecast from seven to the US dollar to 7.30, and to 7.60 by the end of 2018. On Tuesday it was trading around 6.90.
China is stepping up measures to stem capital outflows, sources said on Tuesday, taking aim at outbound investments that have soared to a record high.
The State Administration of Foreign Exchange (Safe) has begun vetting transfers abroad worth US$5 million or more and is stepping up scrutiny of major outbound deals, including those with prior approval, sources with knowledge of the new rules told Reuters.
The yuan has rebounded around 0.5 per cent in the past few sessions, with traders reporting Chinese state-owned banks sold dollars for a second straight day on Tuesday to support the currency.
In seeming response to expectations of further depreciation of the yuan, Mr Fan, a member of China's central bank monetary committee, wrote, "The question you should be asking is 'Will the dollar keep rising? It's already risen so much, will it soon decline?'...In a few days you may found that you changed too much into dollars".
Mr Fan's comments follow an interview with People's Bank of China vice governor Yi Gang on Sunday, who said current conditions point to a stabilisation of China's yuan after a volatile recent performance against the US dollar, and that the currency remains strong.