Goldman Sachs Sees More Upside for China’s Yuan
Chinese yuan. Goldman Sachs now expects USD/CNY at 6.50 within one year, citing structural undervaluation of the currency.
Goldman Sachs has raised its outlook for the Chinese yuan, arguing that the currency remains more than 20 percent undervalued against the US dollar despite its recent appreciation.
The bank now expects USD/CNY to reach 6.80 in three months, 6.70 in six months, and 6.50 within one year, revised stronger from previous forecasts of 6.85, 6.80, and 6.70. The yuan is trading around 6.80, near its strongest levels since March 2023.
Key insights:
- Goldman’s view is not based only on optimism around US-China trade talks.
- The stronger case for the yuan is structural, supported by China’s export competitiveness and large external surplus.
- A weaker US dollar is also improving the relative appeal of Asian currencies.
- Further yuan strength could ease imported inflation pressures in China and support domestic purchasing power.
- For global markets, a stronger yuan may signal improving confidence in Chinese assets and a gradual shift in FX positioning toward Asia.
- However, the move is unlikely to be one-way. Chinese authorities may prefer a controlled appreciation to avoid damaging export competitiveness, while trade negotiations, dollar volatility, and capital flow trends remain key risks.
The main takeaway is that currency markets are beginning to price a stronger Chinese yuan, but the path is likely to be gradual and policy-managed rather than sharp and disorderly.
