Goldman Sachs has lowered its forecast for the yuan
- USD/CNY to 6.60 in 12 months (prior forecast was at 6.15)
- To 6.70 by the end of 2016 (prior 6.20)
- Says the worsening economic slowdown will weaken the yuan and increase its volatility
Comments from London-based strategist Kamakshya Trivedi in a client note Monday:
- "On a longer horizon, the risks are tilted towards further yuan weakness
- China's bumpy downshift in growth is likely to extend, making for greater macro and market volatility along the way."
Adds that yuan weakness will increase sell pressure on other emerging-market currencies:
- Thai baht, Taiwanese dollar, South Korean won, Malaysian ringgit, Chilean peso, Sth African rand are the most vulnerable to yuan depreciation
- Says yuan depreciation increases Chinese competition for exports, also lowers Chinese demand for goods made in the emerging markets
