Goldman Sachs says dollar overvalued as Trump heads to China
Goldman Sachs strategists say the dollar is overvalued as President Trump heads to China for trade talks, with the renminbi at multi-decade lows and likely to appreciate under a potential deal.
Goldman Sachs strategists have flagged the US dollar as overvalued as President Donald Trump heads to China for trade negotiations, with the renminbi trading at its cheapest level in decades. In a note to clients, the bank's forex team argued that the dollar's strength is unsustainable and that a correction is likely, particularly if trade talks yield a deal that allows the Chinese currency to appreciate.
The dollar has been buoyed by a hawkish Federal Reserve and safe-haven demand amid global trade uncertainty, but Goldman Sachs sees the greenback as increasingly disconnected from fundamentals. The renminbi, meanwhile, has been kept artificially weak by Chinese authorities to support exports, but the bank believes Beijing may allow it to strengthen as part of a trade agreement. For forex traders, this divergence creates a potential opportunity: a weaker dollar and a stronger yuan would have significant implications for currency pairs like USD/CNY and broader emerging market currencies. Traders can monitor real-time pricing on NowPrice's forex page to track these moves.
Looking ahead, the outcome of the Trump-Xi meeting will be the key catalyst. If a trade deal is reached, the dollar could weaken further as risk appetite improves and the yuan appreciates. Conversely, a breakdown in talks could reignite safe-haven flows into the dollar. Key levels to watch include the 7.00 handle in USD/CNY and the dollar index around 100. Any shift in Fed policy expectations, driven by trade developments, would also amplify currency volatility.