Goldman Sachs has declared the Chinese yuan one of the most mispriced major currencies on the planet. The bank’s GSDEER model, its proprietary framework for estimating fair exchange rates, pegs the yuan at roughly 25% below where it should be trading on a trade-weighted basis.

The numbers behind the call

Goldman’s updated December 2025 forecast projects the USD/CNY exchange rate will fall to approximately 6.85 over the next 12 months. The bank had previously forecast USD/CNY at 7 back in May 2025, so this revision represents a meaningful shift in conviction.

The fair value implied by the GSDEER model sits near 5 USD/CNY. The gap between where the yuan trades and where the model says it should trade is what produces that 25% undervaluation figure.

The catalyst for the upgraded forecast is straightforward. Chinese exports have been running hotter than expected, and external demand appears to be firming up. When a country sells more goods abroad, its currency typically appreciates because foreign buyers need to convert their dollars, euros, or yen into yuan to pay for those goods.

Goldman has classified the yuan as one of its “highest conviction” long positions heading into 2026.

Why this matters beyond forex desks

A stronger yuan would lower the cost of imports flowing into China, which has been wrestling with deflationary pressures for the better part of two years.

US-China trade tensions remain elevated, with tariff threats hanging over the relationship. Tariffs could partially offset the yuan’s appreciation by making Chinese goods more expensive regardless of currency movements. Goldman acknowledges this dynamic, which is part of why the forecast lands at 6.85 rather than something closer to the model’s theoretical fair value of 5.

The crypto connection

Despite China’s ongoing restrictions on cryptocurrency trading, traders have long used stablecoins, particularly USDT, as a workaround for capital controls. When the yuan weakens or volatility spikes, Chinese investors historically increase their stablecoin purchases as a way to move value outside the reach of domestic currency fluctuations.

A strengthening yuan changes that calculus. If the currency is appreciating, the urgency to hedge into dollar-denominated stablecoins diminishes.

Crypto analysts have been largely quiet on Goldman’s yuan call so far, suggesting the market views this as a slow-burn macro story rather than a catalyst for near-term price action.

The last time the yuan experienced a significant devaluation episode, in mid-2015, Bitcoin saw a notable uptick in Chinese trading volume. The reverse scenario, a sustained yuan appreciation, hasn’t been tested in the current crypto market structure.