Goldman Sachs: friction between the US and China will weaken yuan
Currency strategists at Goldman Sachs believe that the yuan will continue to weaken and very soon reach levels that have not been observed since 2008. The bank raised its USD/CNY forecast for three months from 7.15 to 7.25, the six-month forecast was raised from 7.05 to 7.15, and the one-year forecast was raised from 6.90 to 7.00.
Taking into account the blow the pandemic has dealt to the economy and the approaching presidential elections in the USA, a new round of confrontation between the two countries is unlikely to take place this year. "We do not expect the current tension in the bilateral relations to escalate as much as it was in 2019, and have a large-scale impact on the markets," Goldman Sachs noted.
At the same time strategists note that friction of the USA and China is the factor supporting capital outflow from China, and positions of the Chinese currency look vulnerable, especially as PBOC has shown certain tolerance to its gradual weakening.
The correction of the forecasts was a response to the growing uncertainty in the future US policy towards China. Trump's rhetoric is belligerent, but so far the real steps have been rather restrained, in particular, the recent actions of the White House in response to China's actions in Hong Kong can hardly be called an escalation of tension.