Goldman Revises CNY Forecast Higher

The past few weeks have been particularly meaningful for Asia FX, with both China’s reopening and adjustments from the BoJ impacting FX markets. China’s reopening, in particular, bolsters the case that, while the broad Dollar is still waiting for a challenger—and we may see periods of USD strength in the months ahead—currencies in EM Asia are likely to be beneficiaries from their links to stronger Chinese growth. In particular, we have revised up our 2023 GDP growth forecast in China to an above consensus 5.2% (from 4.5% previously), primarily reflecting the likelihood of stronger sequential growth 3-6 months from now, and our previous analysis indicated that a pick-up in activity should, on balance, lead to a stronger currency. Therefore, we are adjusting our USD/CNY forecasts lower, to 6.80, 6.70, and 6.50 at 3, 6, and 12 month horizons, respectively (from 7.20, 7.00, and 6.90 previously).