China currency will weaken in next 6 months, says Goldman

The Chinese yuan is expected to weaken further in the next six months, a Goldman Sachs analyst said on Wednesday.

Timothy Moe, co-head of Asia macro research, said the bank expects China’s currency to “pop over” the psychological barrier of 7 per dollar, to reach 7.1 in the next six months. The currency pair is trading at around 6.94 as the yuan has declined by 6 percent against the greenback year-to-date.

“It’s probably unlikely to happen before the end of the year because … 7 seems to be the short-term line in the sand … The U.S. is looking at that figure — and probably a bit above — as evidence that might support allegations of currency manipulation,” Moe told CNBC’s “Squawk Box.”

China will want to avoid opening itself to such allegations, particularly ahead of President Donald Trump and Chinese counterpart Xi Jinping’s meeting at the G-20 summit next month, Moe added.

Trump often accuses China of keeping its currency weak so that its exports will be cheaper and therefore more competitive.

China has been criticized for letting its currency fall, but strategists say the country actually has worked to prop the currency up since it got close to that key level of 7. The leadership in Beijing has tried to stem capital outflows, which typically accelerate when its currency weakens.

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