Goldman Sachs Predicts 20% Undervaluation of Yuan, Upgrades Currency Forecast
Goldman Says Yuan 20% Undervalued, Boosts Currency Forecasts
Mint
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Goldman Sachs Group Inc. claims the Chinese yuan is over 20% undervalued against the US dollar and expects it to strengthen over the next year. The firm has revised its forecasts for the yuan to 6.80 in three months, 6.70 in six months, and 6.50 in a year, citing China's strong export performance and external surplus.
- 01Goldman Sachs estimates the yuan is over 20% undervalued against the US dollar.
- 02Revised forecasts predict the yuan will strengthen to 6.50 in a year.
- 03China's external surplus is at unprecedented levels relative to global GDP.
- 04Improving US-China relations and a weaker dollar are supporting yuan strength.
- 05Goldman Sachs emphasizes fundamental factors driving yuan appreciation.
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Goldman Sachs Group Inc. has stated that the Chinese yuan is more than 20% undervalued against the US dollar, predicting continued appreciation over the next year. The bank's strategists, including Kamakshya Trivedi, have adjusted their forecasts, expecting the yuan to reach 6.80 in three months, 6.70 in six months, and 6.50 in one year, up from previous estimates of 6.85, 6.80, and 6.70, respectively. Currently trading at around 6.80, the yuan's strength is attributed to China's substantial external surplus and export competitiveness. Goldman Sachs noted that the yuan's value is supported by improving US-China relations and a weakening dollar. Other financial institutions, such as JPMorgan Asset Management, also anticipate further gains, with a potential boost from an upcoming summit between US President Donald Trump and Chinese President Xi Jinping. Goldman Sachs believes that the case for a stronger renminbi is based on fundamental economic factors rather than just political events.
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If the yuan appreciates as predicted, it could lead to increased purchasing power for Chinese consumers and affect trade balances with countries importing Chinese goods.
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