Goldman Sachs Group Inc (NYSE:GS, ETR:GOS) has released long-term foreign exchange forecasts through 2035, projecting shifts in both major and emerging market currencies as part of its broader analysis of structural investment trends.
The firm's analysts project EUR/USD at 1.21, USD/JPY at 100, GBP/USD at 1.24, and USD/CNY at 5.17 by 2035.
"Most of our strongest total return forecasts are in emerging markets, which is consistent with harvesting long-term real carry premia and converging productivity," Goldman wrote.
The bank's forecasts are based on the mean-reverting behavior of real exchange rates, adjusted for structural factors such as productivity growth and terms of trade.
Goldman continues to rely on its GSDEER model, used for three decades to assess currency "fair value," and has updated it with new productivity estimates derived from long-term population and GDP projections, as well as adjustments for inflation and currency management policies.
Goldman estimates that "the dollar is about 15% overvalued right now," shaping the direction of its forecasts.
The analysts noted that the dollar's elevated valuation has persisted for much of the past decade, but said AI-driven productivity gains could extend its strength.
On the other hand, they view the Chinese yuan as undervalued, with potential to appreciate over time, and expect the Japanese yen, also undervalued, to strengthen as Japan moves away from extraordinary policy easing.
Goldman added that there is "no clear valuation case for the Euro" following recent market adjustments.
The report highlights "very strong total return potential" in several emerging market currencies, including Brazil and South Africa, consistent with the view that markets often overprice drawdown risks once economies have stabilized.
On the US, dollar, Goldman said the broad trade-weighted index has declined this year as policy uncertainty and a less exceptional macro backdrop reduced unhedged capital inflows.
The bank expects the dollar to weaken another 6% to 7% over the next decade, primarily against Asian and emerging market currencies.
Goldman cited two main risks to that outlook: tighter currency management abroad or a renewed wave of AI-led productivity gains in the US that could reinforce dollar strength.
"When thinking about the trends that could influence markets over the next 10 years, it pays to be imaginative," the analysts concluded.