CHINA could take further measures if needed to keep the yuan stable, potentially putting downward pressure on the currency, a former foreign exchange regulator said. Policymakers could increase yuan’s flexibility, expand capital outflows, or control capital inflows to rein in the yuan, which could deviate from economic fundamentals in the short term, wrote Guan Tao, global chief economist at BOC International and a former official at the State Administration of Foreign Exchange (SAFE). The yuan also faces downward pressure from several market factors, including further strengthening of the dollar index, the shrinking spread between U.S. and Chinese yields and the narrowing difference in the growth between the two economies, Guan wrote in an article published in Shanghai Securities News yesterday. Guan, who previously headed the SAFE’s balance of payments department, said the yuan is already losing some momentum, citing shrinking trading volumes in the interbank forex market. China’s yuan hit a near four-year-high against the U.S. dollar Jan. 26 and an index tracking yuan’s value against a basket of currencies is flirting with the highest level since late 2015. China has already taken some measures, including directing financial institutions to hold more foreign exchange in reserve, to slow down yuan’s rapid appreciation. The yuan may continue to rise this year after gaining almost 9 percent in the past two years supported by China’s low inflation, its active fiscal policy, its wider global acceptance and China’s strong exports advantage, Caixin reported yesterday, citing Gao Zhanjun, a researcher with the National Institution for Finance Development. (SD-Agencies) | 