[2026 RMB Exchange Rate Investment Guide] Is there still a chance for USD to RMB? Year-end upward trend analysis and buying point assessment

Renminbi Appreciation Cycle Begins, USD to RMB Faces a Turning Point

2025 is a pivotal year for the RMB. After depreciating against the US dollar for three consecutive years from 2022 to 2024, the RMB finally shows signs of reversal. As the year ends, the USD to RMB exchange rate has strengthened from over 7.3 at the beginning of the year, breaking through the 7.05 level on December 15 with strong momentum, and then continuing to rise to 7.0404, hitting a 14-month high.

The offshore market performance is even more aggressive. The offshore RMB (CNH) against the USD briefly broke below 7.36 at the start of the year but recently rebounded over 4%, also reaching a 13-month high. This reversal reflects a fundamental change in market expectations regarding the RMB outlook.

As of now, the USD to RMB has appreciated about 3% year-to-date. The onshore market has fluctuated bidirectionally between 7.04 and 7.3, demonstrating clear resilience. International investment banks are generally optimistic about the RMB’s future trend, indicating that a new appreciation cycle is underway.

Core Factors Driving the RMB Reversal: Three Key Supports

Structural Shift from Strengthening to Weakening of the US Dollar Index

The US Dollar Index experienced a historic decline in the first half of 2025. From 109 at the start of the year to around 98, a nearly 10% drop, marking the weakest first half since the 1970s. Although it briefly rebounded in November due to cooling expectations of Fed rate cuts, in December, with rate cuts implemented and dovish signals strengthening, the dollar came under pressure again, briefly falling below 97.87 and retreating to the 97.8-98.5 range.

A moderate strengthening of the dollar usually puts pressure on the RMB, but this time is different. The structurally weak dollar environment provides the RMB with medium- to long-term appreciation potential.

Breakthroughs in US-China Trade Negotiations Offer Hope

Easing trade relations are a key turning point. In the latest round of US-China economic and trade talks, both sides reached a ceasefire consensus: the US will reduce tariffs related to fentanyl from 20% to 10%, and suspend the 24% retaliatory tariffs until November 2026. Both countries also agreed to temporarily halt export controls on rare earths and port fee measures, and expand US agricultural purchases.

Although the Geneva agreement in May quickly broke down, the current negotiation atmosphere is markedly more stable. If the current situation persists, the RMB exchange rate environment is expected to remain stable in the long term; if frictions escalate, markets will face renewed depreciation pressures.

Gradual Fermentation of China’s Steady Growth Policies

China’s central bank favors loose monetary policy to support economic recovery, which in the short term exerts downward pressure on the RMB. However, fiscal stimulus and real estate support measures are gradually taking effect, coupled with sustained export resilience, leading foreign capital to reallocate RMB assets. In the long run, economic stabilization will strongly support RMB appreciation.

Major International Banks Are Bullish: USD to RMB Will Break 7

Deutsche Bank analysts believe that the recent strength of the RMB signals the start of a long-term appreciation cycle. They forecast USD to RMB will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026, indicating strong RMB appreciation potential.

Goldman Sachs’s outlook is even more optimistic. In a report released in May by Global FX Strategist Kamakshya Trivedi, it was noted that the RMB’s real effective exchange rate is undervalued by 12% compared to its ten-year average, with a 15% undervaluation against the USD. Based on this undervaluation and progress in trade negotiations, Goldman Sachs significantly raised its USD to RMB forecast from 7.35 to 7.0 over the next 12 months. The firm emphasizes that strong Chinese exports and the government’s preference for policy tools over currency depreciation to stimulate the economy will support the RMB.

Is Now the Time to Allocate RMB? How Should Investors Respond

Short-term Outlook: Range-bound Fluctuations, Low Probability of Rapid Appreciation

In the short term, the RMB is expected to remain relatively strong, but with limited amplitude. The likelihood of rapid appreciation below 7.0 before the end of 2025 is low. The currency is mainly expected to fluctuate within a range, moving inversely to the dollar. Investors should avoid excessive optimism and wait patiently for clearer breakout signals.

Three Key Variables to Watch Closely

The trajectory of the US Dollar Index, signals from the RMB midpoint rate adjustments, and the strength and pace of China’s steady growth policies are core variables influencing future exchange rates. Among these, the dollar trend is most direct; the RMB midpoint rate adjustments determine the short-term direction, while China’s policy intensity shapes the medium- to long-term trend.

Investment Strategy: Focus on Four Judgment Dimensions

1. Central Bank Monetary Policy Orientation: Loose policies (rate cuts, reserve requirement reductions) typically pressure the RMB, while tightening (rate hikes, reserve increases) support RMB strength. For example, in 2014, the People’s Bank of China cut rates six times and significantly lowered reserve requirements, during which USD to RMB rose from 6 to 7.4, illustrating the profound impact of monetary policy.

2. Economic Data Performance: GDP, PMI, CPI, and fixed asset investment data directly influence foreign capital flows. When China’s economic performance exceeds expectations and outperforms other emerging markets, foreign inflows increase, boosting RMB demand; otherwise, the RMB faces downward pressure.

3. USD Index Trends: The Federal Reserve and ECB monetary policies are key drivers. In 2017, the eurozone’s robust recovery and the ECB’s signals of tightening pushed the euro higher and the USD index down by 15% for the year. During the same period, USD to RMB also declined, showing a high correlation.

4. Official Exchange Rate Guidance Signals: The RMB/USD midpoint rate model incorporates an “inverse cycle factor,” reinforcing official guidance on the exchange rate. In the short term, official orientation has a noticeable impact, but medium- to long-term trends are primarily driven by market direction.

Five-Year Review: Understanding RMB Appreciation and Depreciation Cycles

Strong Rebound During the 2020 Pandemic

At the start of 2020, USD to RMB fluctuated between 6.9 and 7.0, driven by the pandemic and US-China tensions, peaking at 7.18 in May. However, as China led the pandemic control and economic recovery, coupled with the Fed’s near-zero interest rates and China’s prudent policies, the interest rate differential widened, supporting a strong RMB rebound to 6.50 by year-end, with an approximately 6% appreciation for the year.

2021 Export-Driven Steady Performance

China’s exports remained strong, the economy improved, and the central bank maintained prudent policies. The USD index stayed low, and USD to RMB fluctuated narrowly between 6.35 and 6.58, averaging around 6.45, with the RMB remaining relatively strong.

2022 Impacted by Aggressive Fed Rate Hikes

The exchange rate rose from 6.35 to over 7.25, depreciating about 8% for the year, the largest decline in recent years. The main reasons were the Fed’s aggressive rate hikes boosting the dollar index and China’s pandemic policies dragging on the economy, along with a worsening real estate crisis, leading to a collapse in market confidence.

2023 Under Continued High-Interest Rate Environment

USD to RMB fluctuated between 6.83 and 7.35, with an average around 7.0. China’s economic recovery was below expectations, and the ongoing real estate debt crisis, combined with high US interest rates, kept the dollar index between 100 and 104, exerting downward pressure on the RMB throughout the year.

2024 Signs of Reversal on the Horizon

Weakening dollar eased pressure on the RMB, and China’s fiscal stimulus and real estate support measures boosted confidence. Volatility increased significantly, with USD to RMB rising from 7.1 to 7.3 mid-year, and offshore RMB breaking above 7.10 in August to a six-month high. These signs indicate a new cycle is about to start.

Offshore RMB Trends: Why Are They More Sensitive Than Onshore?

The behavior differences between CNH and CNY are noteworthy. Since CNH is traded in international markets like Hong Kong and Singapore with high liquidity and capital mobility, it reflects global market sentiment and exhibits larger fluctuations. In contrast, CNY is influenced by capital controls and PBOC’s guidance through the midpoint rate and forex interventions, resulting in more moderate volatility.

In 2025, despite multiple fluctuations, CNH generally shows a volatile upward trend. Early in the year, tariffs and a surge in the dollar index to 109.85 caused CNH to briefly break below 7.36. The PBOC responded with measures such as issuing 60 billion yuan offshore bills to recover liquidity and strict control of the midpoint rate. Recently, with easing US-China dialogue and rising expectations of rate cuts, CNH has strengthened significantly, breaking below 7.05 on December 15, rebounding over 4% from the start of the year.

Conclusion: Grasp the Cycle, Improve Profitability

As China enters an easing monetary policy cycle, the USD to RMB trend is becoming more apparent. Historical cycles driven by policy can last up to ten years, during which short- and medium-term fluctuations are influenced by USD movements and unexpected events.

For investors, understanding the four key factors affecting RMB trends—central bank policies, economic data, USD direction, and official guidance—can greatly enhance profit opportunities. The forex market is primarily macro-driven, with transparent data releases and large trading volumes supporting two-way trading, making it a relatively fair and advantageous investment tool for individual investors.

The RMB appreciation cycle has just begun. Grasping the rhythm is essential to ride the wave profitably.