Goldman Sachs Group Inc. expects more gloom for the Chinese currency despite efforts from policymakers to shore up sentiment.

The US bank has slashed its projection for the onshore yuan, targeting a move to 7.1 against the dollar in the next three months, according to a note published Sunday. The firm previously expected the currency to be at 6.8 during the period.

“Significant weakness in China data and renewed dollar strengthening on the back of progress in US debt-ceiling negotiations” have weighed on the currency, wrote China economist Hui Shan. The onshore yuan traded 0.1% weaker Monday at 7.0241.

The Chinese currency fell past the key 7-per-dollar threshold last week, the first time since December. The People’s Bank of China and the nation’s foreign exchange regulator have recently called for more stability, with state papers echoing the message Monday touting a return to market-driven moves as long as speculation is curbed.

Measures to support the yuan may not be effective without positive tailwinds to buoy it, according to the report. A stronger greenback has also been at play with the Bloomberg Dollar Spot Index gaining more than 1% over the past two weeks. “It is difficult to see what would drive the yuan notably stronger in the near term,” Shan wrote.

Since last week, more yuan bears have emerged on Wall Street with hopes of a re-opening led recovery being dented by disappointing activity and credit data. Citigroup Inc targets the yuan to move towards 7.2 in the near term while Societe Generale SA expects 7.3 by year-end. Nomura Holdings Inc. says the currency could hit 7.3 by mid-July.

However, that weakness may not last, said Mitul Kotecha, head of emerging markets strategy at TD Securities. He sees the yuan’s drop as a function of dollar strength and maintains his year-end forecast of 6.55 as the outlook for the debt ceiling impasse and the interest rate policy in the US becomes clearer.

For now, policymakers may benefit from a fall in the yuan short-term. “The authorities will probably favor a little bit of weakness in the Chinese currency at least to help provide a little bit of stimulus to the economy,” said Kotecha in a Bloomberg Television interview Monday.

--With assistance from Matthew Burgess.

(Updates throughout.)