Synopsis:

Goldman Sachs reinforces its bullish view on the Chinese Yuan (CNY), highlighting that easing US-China tensions, robust exports, and undervaluation metrics set the stage for further USD/CNY downside. Their 6- and 12-month targets are now 7.10 and 7.00, respectively.

Key Points:

• Market Action:
  Both onshore and offshore USD/CNY broke to new 2025 lows (~7.18), extending the recent bout of Asia FX strength.

• US-China Trade Detente:
  With tariff focus shifting to Europe, Goldman argues the reduced trade friction with China clears the way for a stronger Yuan.

• Valuation Case:
  The Yuan is undervalued on both a real trade-weighted basis and vs. the USD, especially considering China’s resilient export sector.

• Forecasts Maintained:
  Goldman reiterates its 6-month USD/CNY target at 7.10 and 12-month at 7.00, emphasizing further room for appreciation.

Conclusion:

Goldman continues to see USD/CNY downside as the base case, citing improving macro conditions and geopolitical optics. Investors are advised to position for CNY strength as the “strong side of the distribution” becomes more probable.