2026 US Dollar to Chinese Yuan Exchange Rate Forecast: A New Cycle from Depreciation to Appreciation

The Chinese yuan has experienced a three-year depreciation cycle from 2022 to 2024, and now faces a crucial turning point. Recently, the yuan successfully broke through the psychological level of 7.0, and is currently establishing solid support around 6.9, opening a new medium- to long-term appreciation trajectory. This not only signals a shift in the exchange rate cycle but also indicates upcoming adjustments in investment strategies. This article will analyze the USD/CNY trend forecast from multiple perspectives to help investors seize opportunities in 2026.

The Yuan Ends Three Years of Depreciation, Breaking the 7.0 Psychological Barrier — The Logic Behind This Shift

2025 marks a turning point for the yuan. Throughout the year, USD/CNY fluctuated within a broad range of 6.95 to 7.35, appreciating about 4%. More importantly, driven by progress in China-U.S. negotiations, a weakening dollar index, and renewed foreign interest in Chinese assets, the yuan successfully broke through the 7.0 mark at year-end, reaching a high of around 6.9623 — the highest since 2022.

This change was hard-won. Looking back at the year’s trend, the yuan faced severe tests in the first half. Due to increased global tariff uncertainties, the dollar index remained strong, causing offshore RMB to dip below 7.40 and even hit new lows not seen since the 2015 “8.11” exchange rate reform. Market sentiment was pessimistic about the yuan’s outlook.

However, in the second half, the situation dramatically reversed. Progress in China-U.S. trade negotiations, signs of easing bilateral relations, and a turn downward in the dollar index all contributed to opening an upward channel for the yuan. Especially against the backdrop of a general appreciation of other non-U.S. currencies globally, the yuan began to appreciate modestly against the dollar, shifting market sentiment from extreme pessimism to cautious optimism.

Who Is Driving USD/CNY? An In-Depth Analysis of Four Key Factors

To accurately forecast USD/CNY, it’s essential to understand the driving forces behind it. These factors stem from external environments and internal policies, intertwining and constraining each other.

The Dual Impact of the Dollar Index

In 2025, the dollar index experienced significant volatility. In the first half, it declined from 109 to about 98, a nearly 10% drop, marking the weakest first half since the 1970s. However, by November, expectations of Fed rate cuts eased, U.S. economic data exceeded expectations, and the dollar index rebounded, repeatedly surpassing the 100 mark.

This appeared to pressure the yuan, but the positive effects of China-U.S. agreements temporarily offset the short-term dollar rally. As we enter early 2026, with the Fed officially beginning a new easing cycle, the dollar index has retreated to a range of 98.8–98.2. The global de-dollarization trend and the dovish stance of the Fed provide a favorable external window for the yuan to maintain the “6 era.” The future downside space for the dollar index will directly determine the upward potential of USD/CNY.

Fragile Balance in China-U.S. Economic and Trade Relations

In the latest China-U.S. trade negotiations in Kuala Lumpur, both sides reached important consensus. The U.S. agreed to reduce tariffs on Chinese goods related to fentanyl from 20% to 10%, and to suspend the 24% additional tariffs on equivalent measures until November 2026. Additionally, both countries agreed to delay restrictions on rare earth exports, port fees, and expand U.S. soybean and agricultural product purchases.

However, this balance remains fragile. Deep disagreements in trade, technology, and other areas persist, only temporarily managed. Therefore, whether the substantive improvement in China-U.S. relations can continue into the second half of 2026 remains the most critical external variable in USD/CNY forecasts. If the status quo persists, the yuan will likely remain stable; if tensions escalate, market pressure will reemerge, and the yuan could weaken.

Long-term Impact of the Fed’s Policy Shift

The Federal Reserve’s monetary policy is crucial for the dollar’s trend. Market expectations for 2026 still include 2-3 rate cuts. Although inflation data fluctuate, as the labor market stabilizes, the Fed’s focus shifts to preventing a hard landing, and this preemptive easing weakens U.S. Treasury yields.

What does easing interest rate differentials mean? It implies reduced demand for high-yield U.S. bonds, prompting capital to flow back into emerging markets, thereby supporting the yuan. This is a favorable medium-term factor.

The PBOC’s Easing Cycle

The People’s Bank of China tends to maintain an accommodative monetary policy to support economic recovery, especially amid sluggish real estate and weak domestic demand. Cutting interest rates or reserve requirements to inject liquidity generally exerts downward pressure on the yuan — a short-term phenomenon.

However, if easing policies are combined with stronger fiscal stimulus that stabilizes China’s economy, the long-term outlook for the yuan will improve. Investors should distinguish between short-term policy signals and long-term economic fundamentals.

Investment Banks’ 2026 Forecast: The Yuan Is Expected to Strengthen Further

Market consensus suggests that the yuan may be at a cyclical turning point. The depreciation cycle starting in 2022 may have ended, and the yuan could enter a new medium- to long-term appreciation phase.

International investment banks are relatively optimistic about the yuan’s outlook. Deutsche Bank notes that recent yuan strength against the dollar could signal the start of a long-term appreciation cycle, with a forecast of around 6.7 in 2026. Goldman Sachs is even more bullish, projecting a target of 6.85 for USD/CNY in 2026.

What underpins these forecasts? Three main factors: first, China’s export resilience; second, the gradual reallocation of foreign capital into yuan assets; third, a structurally weaker dollar index. These factors reinforce each other, laying a foundation for further yuan appreciation.

Is It Still Profitable to Buy RMB Now? Timing and Strategy Analysis

For investors, the key questions are: Is it too late to enter now? How much room for growth remains?

Technically, the yuan is expected to remain volatile but generally strong in the short term. After breaking the 7.0 psychological level at the end of 2025, it now shows a deep correlation with the dollar index, with strong support around 6.9. Since early 2026, it has stabilized below 7.0, making a quick drop below 7.1 less likely. The market is seeking a new equilibrium between 6.90 and 7.00.

What does this imply? Limited upside potential but controlled risk. Aggressive traders might consider short positions between 6.95 and 7.00; more conservative investors should pay attention to additional variables.

Key variables to monitor:

1. How much downside is there for the dollar index? Will the Fed’s 2026 rate cuts further weaken the dollar? This will directly cap the yuan’s appreciation.

2. Will the PBOC’s mid-price adjustments at the 6.9 level serve as buffers to prevent rapid appreciation? The PBOC generally prefers a gradual yuan rise and may intervene to balance fluctuations.

3. How strong will China’s 2026 growth stabilization policies be in boosting domestic demand and the stock market? This will directly influence the long-term bottom of the yuan. It’s the most fundamental factor.

Four Dimensions to Accurately Judge Future Exchange Rate Trends

It’s better to teach a man to fish than to give him a fish. Once you understand the influencing factors, you should build your own judgment framework. Regardless of market changes or policy adjustments, the yuan’s trend can be analyzed from these four dimensions:

1. Central Bank’s Monetary Policy Orientation

The PBOC’s policies determine the liquidity environment. When policies are accommodative (e.g., rate cuts, reserve requirement reductions), liquidity increases, and the yuan tends to weaken; when policies tighten (e.g., rate hikes, reserve ratio hikes), liquidity tightens, and the yuan tends to strengthen.

A classic example is 2014: starting in November, the PBOC adopted a loose monetary stance, cutting loan rates six times and lowering reserve requirements significantly, reducing the reserve ratio for small and medium banks from 18% to below 8%. The result was USD/CNY rising from 6 to a high of 7.4, illustrating the profound influence of monetary policy on the exchange rate.

2. China’s Economic Fundamentals

Economic data reflect a country’s attractiveness. When China’s economy grows steadily and outperforms other emerging markets, foreign capital inflows increase, boosting demand for the yuan and supporting appreciation. Conversely, economic weakness exerts downward pressure.

Key indicators include GDP, PMI, CPI, and fixed asset investment. Positive trends in these metrics support yuan strength.

3. USD Trends and International Monetary Policies

The dollar’s trajectory directly impacts USD/CNY. Fed and ECB policies are critical. For example, in early 2017, the Eurozone’s robust recovery and signals of tightening policies pushed the euro higher, while the dollar index weakened by 15% over the year, with USD/CNY following suit.

This demonstrates that monitoring dollar index movements, Fed policy, and global central bank actions is vital for predicting yuan trends.

4. Official Guidance and Exchange Rate Management

Unlike freely floating currencies, the RMB has experienced multiple exchange rate reforms. In May 2017, the central bank adjusted the RMB midpoint pricing model to include a counter-cyclical factor, giving authorities more tools to guide short-term fluctuations.

This means official intervention can smooth short-term volatility, but the long-term trend still depends on fundamentals. Short-term influences may be present, but the overall direction is determined by economic and monetary fundamentals.

Five-Year Review: How Has the RMB Cycle Evolved?

History offers valuable lessons. Reviewing the past five years of RMB exchange rate movements reveals where we stand now.

2020: Initial Recovery

Early 2020, USD/CNY fluctuated between 6.9 and 7.0. Due to trade tensions and the pandemic, the yuan depreciated to 7.18 in May. But as China quickly contained the virus and economic recovery outpaced others, coupled with Fed rate cuts to near zero, the yuan rebounded to around 6.50 by year-end, appreciating about 6%.

2021: Stable Appreciation

With strong exports and steady growth, and the dollar index low, USD/CNY hovered between 6.35 and 6.58, averaging about 6.45, maintaining relative strength.

2022: Beginning of Depreciation

This was a turning point. USD/CNY rose from 6.35 to over 7.25, a decline of about 8%, the largest in recent years. The reasons: aggressive Fed hikes, soaring dollar index, China’s strict COVID policies, real estate crises, and declining market confidence.

2023: Deepening Depreciation

USD/CNY ranged from 6.83 to 7.35, averaging about 7.0, ending at 7.1. The Chinese economy’s recovery lagged expectations, real estate debt issues persisted, and high U.S. rates kept the dollar strong, pressuring the yuan.

2024: Increased Volatility

A weakening dollar eased pressure on the yuan. China’s fiscal stimulus and property measures boosted confidence. USD/CNY fluctuated more, from 7.1 to around 7.3 mid-year, with offshore RMB breaking 7.10 in August, hitting a six-month high.

2025–2026 Outlook: From Recession to Recovery

Combining the five-year evolution, the current phase indicates a transition from a long-term depreciation cycle to a new appreciation cycle. The target range for 2026 is estimated at 6.70–6.85, implying 5–10% upside potential.

Offshore RMB (CNH) vs. Onshore RMB (CNY): Volatility and Opportunities

Because CNH is traded freely in markets like Hong Kong and Singapore, capital flows are less restricted, reflecting global sentiment; while CNY is subject to capital controls and guided by the PBOC through daily fixing and interventions. Thus, CNH tends to be more volatile.

In 2025, despite multiple fluctuations, offshore RMB (CNH) showed an overall upward trend. Early in the year, U.S. tariffs and a soaring dollar index to 109.85 caused CNH to dip below 7.36. The PBOC issued 60 billion offshore bonds to drain liquidity and managed the fixing. Recently, with easing U.S.-China relations, China’s growth policies, and Fed rate cut expectations, CNH strengthened sharply, breaking 6.95 and reaching a 14-month high. This indicates strong international capital confidence in the yuan’s appreciation.

For investors, CNH’s larger volatility offers opportunities if they can tolerate risks. But higher volatility also means higher risk.

USD/CNY 2026 Outlook: From Forecast to Reality

Based on the above analysis, the conclusions are:

• Major trend: The yuan has ended its depreciation cycle and is likely entering a new appreciation phase.
• Specific targets: Deutsche Bank forecasts 6.7; Goldman Sachs projects 6.85 — both within a reasonable range.
• Key variables: Dollar index trajectory, China-U.S. relations, and Chinese economic data will determine the appreciation extent.
• Investment strategies: Short-term traders might consider positions between 6.95 and 7.00; medium-term investors should target 6.70–6.85; long-term investors need to monitor China’s economic recovery sustainability.

Regardless of strategy, remember: the forex market is driven by macro factors, economic data are transparent, trading volume is large, and the market supports two-way trading, making it relatively fair. Understanding the logic behind USD/CNY movements is key to profiting in this market.