(Bloomberg) -- China's yuan will be truly stable only when three major factors are in place, according to a former foreign-exchange regulator.
The economy has to be steady enough to spur confidence among investors, overseas markets have to be calm and the dollar shouldn't be too strong, said Guan Tao, former director of the international payments department at China's State Administration of Foreign Exchange.
His comments highlight the challenges the yuan faces even as it's poised to record its biggest quarterly advance since 2010. Some of those gains have come because of suspected central bank intervention amid pressures including signs that economic growth is peaking. China has taken several steps to increase access to onshore markets as it looks to combat outflows, with the latest initiative an upcoming cross-border bond link that will allow investors in Hong Kong to buy onshore debt.
“Until now, supply has failed to meet demand in the foreign-exchange market,” Guan said at the New Renminbi Reality conference in Beijing on Thursday. “The market-opening measures will also bring positive sentiment toward the yuan in the international market,” he said, adding that China's economy will likely stabilize in the second half of the year.
Other speakers at the conference included Stephen Roach, senior fellow at the Jackson Institute for Global Affairs at Yale University and Australia & New Zealand Banking Group Ltd. Greater China Chief Economist Raymond Yeung. Also taking part were Yang Liu, chairman of Atlantis Investment Management, and Chen Shuang, chief executive officer at China Everbright Ltd.
Patrick Wu, head of yuan trading at ANZ, said at the event that the Chinese currency will end the year at 6.70 per dollar, compared with 6.7800 late Thursday. He said that he is optimistic on capital account flows and China's foreign-exchange reserves, and the trade surplus would rise in the second half of 2017. The median forecast in a Bloomberg survey is for the yuan to drop 2.7 percent the rest of this year to 6.9700.
The new renminbi reality is stability, said Roach, using the official name for China's currency.
To contact Bloomberg News staff for this story: Ran Li in Beijing at rli279@bloomberg.net, Helen Sun in Shanghai at hsun30@bloomberg.net.
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Robin Ganguly, Sam Mamudi
With assistance from Ran Li, Helen Sun
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