Offshore Yuan Holds at Strongest Since 2022

Key points

• The offshore Yuan touched 6.67 against the USD, marking its strongest level since June 2022.
• Goldman Sachs projecting further appreciation to 6.40.
• Yuan strength is bullish for US equities, with the S&P 500 boasting a 90% win rate.
• For Chinese equities (Shanghai Composite), the currency breakout offers a strong short-term edge (72% win rate over two weeks), but the one-year outlook remains a coin toss

Chinese Yuan Hits 4-year High

The US dollar remains the "dominant currency" for lending in developing economies, but the Chinese Yuan is rising as a small yet growing competitor. The Chinese Yuan touched 6.67 against the USD, hitting its highest level since June 2022.

Goldman Sachs expects the Yuan to appreciate to 6.40 against the dollar. For instance, exchanging $10,000 at the current 6.67 rate yields 66,700 RMB; at the target rate of 6.40, that RMB would be worth approximately $10,422, representing a gain of about 4.2%.

This dynamic could make the return outlook for Chinese assets significantly more attractive, as foreign investors stand to profit from currency appreciation when their RMB-denominated assets can be converted back into more dollars.

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