Catenaa, Friday, May 16, 2025-Goldman Sachs has revised its outlook for the Chinese Yuan, forecasting the USD/CNY exchange rate to decline to 7.20 within three months, 7.10 in six months, and ultimately reach 7.00 over the next year.
The bank’s updated projections reflect expectations that the yuan will steadily strengthen against the dollar.
The firm says the Yuan’s is currently undervalued on a real trade-weighted basis, particularly against the US dollar and says that as the key driver.
This undervaluation, combined with resilient Chinese exports, could support a firmer onshore Yuan despite ongoing tariff concerns. Goldman’s assessment was highlighted in a Bloomberg report based on a recent internal note.
Goldman Sachs attributes the expected appreciation to the Yuan’s undervalued status relative to a basket of global currencies used in China’s trade, suggesting that sustained export demand will increase the currency’s value.
The bank notes that stronger exports naturally boost demand for the Yuan, reinforcing upward pressure.
In the short term, this forecast implies potential repricing in Yuan-related derivatives markets.
Instruments betting on depreciation may face downward adjustments if the Yuan’s climb is smoother than expected. Market watchers should monitor the forward curve and implied volatility for signs of shifting sentiment.
Despite these positive signals, risks remain.
A delay in US Federal Reserve rate cuts or a persistent strong dollar could stall Yuan gains.
However, Goldman views current pricing as detached from fundamental trade dynamics, indicating opportunities for more stable returns in FX markets.
Investors are advised to review hedging strategies, especially regarding non-deliverable forwards, to align with evolving Yuan momentum.
