Morgan Stanley Raises Yuan Forecast After Currency’s Nearly 6% Annual Rally — TradingView News

Morgan Stanley MS sees more potential upside for the Chinese yuan, but the bank is taking a more measured stance than investors calling the currency deeply undervalued. The yuan could strengthen to 6.70 against the dollar in the near term, helped by stronger growth and improving risk sentiment, while Morgan Stanley lifted its year-end forecast to 6.75 from 7, putting its view closer to Bloomberg consensus. Robin Xing, the bank’s chief China economist, argued that the CFETS index has already moved back toward levels seen in recent years, suggesting the yuan’s post-weakness catch-up phase may now be largely complete.

That position contrasts with a more bullish group led by Goldman Sachs Group GS, which estimates the yuan is more than 20% undervalued and expects it to move toward 6.5 over the coming year. JPMorgan Asset Management, Eurizon SLJ Capital’s Stephen Jen and Lotus Asset Management’s Hao Hong are also among those expecting additional gains. The onshore yuan was little changed at 6.7923 on Wednesday, even after the currency advanced almost 6% against the dollar over the past year, ranking among Asia’s stronger performers, while both onshore and offshore yuan rates pushed through the closely watched 6.8 per dollar level this week to their strongest levels since early 2023.

The setup could matter more for investors ahead of the Trump-Xi summit in Beijing this week, with traders watching whether the meeting may help extend the trade detente that has supported stocks and the yuan. Yuan bulls point to strong exports, persistent trade surpluses and improving investor sentiment as possible reasons for further appreciation, while Morgan Stanley’s more cautious view rests on the idea that Beijing has limited incentive to drive broader currency strength while domestic demand remains uneven and external risks linger. The bank also said the People’s Bank of China is likely to remain wary of soft domestic prices and is unlikely to use currency strength to address growth imbalances, meaning dollar-yuan may remain more tied to broader dollar moves, even as Morgan Stanley still sees room for another 3%-4% CFETS index appreciation toward the end of 2027.