Goldman Sachs raised its forecasts for the Chinese yuan, arguing the currency remains significantly undervalued despite recent appreciation and is likely to strengthen further on the back of China’s large external surplus and export competitiveness.
Goldman analysts said the case for a stronger yuan extended beyond optimism surrounding a possible meeting between U.S. President Donald Trump and Chinese President Xi Jinping next week.
“Markets are looking towards U.S.-China trade negotiations as a catalyst, but we think the case for a stronger renminbi is more fundamental and longer-lasting,” the analysts wrote.
Goldman estimates the yuan remains more than 20% undervalued against the dollar based on its valuation models.
The bank revised its onshore yuan's USD/CNY forecasts to 6.80 in three months, 6.70 in six months, and 6.50 in 12 months, compared with previous forecasts of 6.85, 6.80, and 6.70, respectively.
Goldman said China’s external surplus was approaching unprecedented levels as a share of global GDP, reflecting both strong export competitiveness and an undervalued currency.
Official data on Saturday showed that Chinese exports jumped 14.1% in April amid semiconductor equipment demand.
The bank acknowledged that higher energy prices linked to the Iran conflict and weaker growth among China’s trading partners could weigh on the trade balance in the short term. However, it said the global push toward energy security and renewable investment would likely benefit China over time due to its dominance in clean energy supply chains.
source https://www.investing.com/news/forex-news/goldman-sachs-raises-yuan-forecasts-on-china-export-strength-4674664
