Leading global bank Goldman Sachs wrote in a note to clients that the Chinese yuan is at least 20% undervalued against the US dollar. The investment banking giant expects the local currency to keep strengthening over the coming years. The development indicates that the Chinese yuan has further upside, boosting currency forecasts in the broader forex markets.
The case for a stronger Chinese yuan is “more fundamental and longer-lasting,” based on China’s export strength and external surplus, wrote Goldman Sachs. The yuan is well below the levels justified by China’s export strength, wrote analysts led by Kamakshya Trivedi.
“China’s external surplus is approaching unprecedented levels as a percentage of global GDP, reflecting deep levels of export competitiveness, and also a highly undervalued currency, with currency appreciation an equilibrium outcome of those forces,” Goldman Sachs strategists wrote in the note highlighting the strength of the Chinese yuan.
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Chinese Yuan Will Rise To 6.50 Against the US Dollar, Predicts Goldman Sachs
The Chinese yuan is currently at 6.80 against the US dollar on Friday. Goldman Sachs predicted that the local currency could rise to 6.70 in six months and hit 6.50 in a year. The currency is near its strongest level against the US dollar since early 2023. The bank remains confident that the currency will outperform this year and exceed expectations. The confidence stems after the currency is being highly used for payment settlements in Asia and the Global South.
The People’s Bank of China (PBOC) is raising exporter conversion ratios, which also suggests that “a gradual but sustained move is still the right baseline,” said Goldman Sachs. Therefore, currency traders can bet on the local currency as its performance could exceed market expectations. The DXY index, which tracks the US dollar, has remained weak since 2025. The USD is struggling to climb above the 100 level and remain weak in the indices.