Goldman Sachs has quantified a long-standing currency market suspicion: the US dollar is overvalued against the Chinese renminbi by roughly 20%. The assessment arrives as President Trump visits China for meetings with President Xi Jinping, adding geopolitical weight to the analysis.
The bank's strategists, led by Kamakshya Trivedi, used proprietary models to determine the renminbi is trading well below fundamental fair value. The current USD/CNY rate is about 6.79. Goldman forecasts the yuan will appreciate to 6.70 over six months and 6.50 within a year-representing roughly 4.5% strengthening.
The issue has a long history, culminating in the 2008 China Currency Manipulation Act, which labeled Beijing's exchange rate practices a trade subsidy. During the trade war, a weaker yuan acted as a natural hedge for Chinese exporters against US tariffs.
For investors, a stronger renminbi could make Chinese imports more expensive in dollars, impacting consumer electronics and manufacturing costs. It would also provide a tailwind for Chinese equities and US companies with revenue in China. Goldman notes the dollar appears overvalued broadly, suggesting broader weakening could amplify yuan gains.