## 2026 RMB Exchange Rate Outlook: Is Now a Good Time to Exchange for RMB?

Since 2025, the RMB has experienced highly volatile movements. After three years of continuous depreciation from 2022 to 2024, the RMB finally reversed its downward trend and rebounded. The USD to RMB exchange rate fluctuated within the **7.04 to 7.3** range, breaking above 7.05 by mid-December and reaching a nearly 14-month high of 7.0404, demonstrating clear upward momentum.

If you're considering whether it's worthwhile to exchange for RMB now, the answer is: **short-term yes, but wait for the right timing**. The RMB is expected to remain relatively strong in the coming months, but the probability of a rapid appreciation breaking below 7.0 is low. Overall, the trend will be oscillating upward rather than a straight surge.

## Why Has the RMB Suddenly Started Appreciating?

### Signs of Easing in China-US Negotiations

In the first half of 2025, global tariff uncertainties and a strong US dollar temporarily pressured the RMB, with offshore RMB even breaking below **7.40**, hitting a new low since the 2015 exchange rate reform. However, in the second half, positive news emerged from China-US trade negotiations. In the latest round, the US reduced tariffs related to fentanyl from 20% to 10%, and temporarily suspended rare earth controls, reaching a trade truce. This political easing directly boosted market sentiment.

### US Dollar Index Reverses Downward

In the first half of 2025, the US dollar index declined from 109 at the start of the year to 98, a nearly 10% drop—its weakest first half since the 1970s. Although it rebounded above 100 in November due to expectations of Fed rate cuts easing, in December, with actual rate cuts and dovish policy signals, the dollar index fell again, hitting a low of 97.869. The RMB and the dollar index usually move inversely; a weaker dollar naturally supports RMB appreciation.

### China's Stabilization Policies Take Effect

Against the backdrop of a sluggish real estate sector, the People's Bank of China (PBOC) has continued to signal liquidity easing, with fiscal stimulus measures gradually taking effect. While these policies may exert short-term downward pressure on the RMB, effectively stabilizing economic growth will, in the long run, boost RMB valuation and attract foreign investment back into RMB assets.

## The Optimistic Predictions of Three Major Investment Banks

Institutions generally hold a positive outlook on the RMB:

**Deutsche Bank** believes the RMB is entering a long-term appreciation cycle, estimating it will rise to 7.0 by the end of 2025 and further to **6.7** by the end of 2026.

**Goldman Sachs** is more aggressive. In a May report, the bank's global FX strategists sharply raised their 12-month USD to RMB forecast from 7.35 to **7.0**. Goldman’s logic is that the current real effective exchange rate of RMB is undervalued by 12% relative to the ten-year average, with an even greater undervaluation of 15% against the USD. Based on progress in China-US negotiations, Goldman expects the RMB to "break 7" (appreciate below 7.0) possibly sooner than the market anticipates. Additionally, Goldman emphasizes that strong Chinese exports will support the RMB.

## Four Major Factors Influencing RMB Appreciation or Depreciation

To accurately grasp RMB trends, investors should focus on the following four aspects:

### 1. People's Bank of China Monetary Policy Direction

Monetary policy tightness or looseness directly impacts money supply and thus exchange rates. Rate cuts or reserve requirement ratio reductions increase supply expectations, exerting downward pressure on RMB; conversely, rate hikes or reserve ratio increases stimulate appreciation. Since 2014, the PBOC has cut loan rates six consecutive times and significantly lowered the reserve requirement ratio for small and medium-sized financial institutions from 18% to below 8%. During this period, USD to RMB rose from 6.3 to 7.4, illustrating the profound influence of policy.

### 2. China's Economic Fundamentals

When China's economy maintains steady growth and outperforms other emerging markets, foreign capital inflows increase, boosting demand for RMB and pushing up its exchange rate. Conversely, economic weakness puts pressure on RMB. Key data to watch include:
- **GDP**: released quarterly, reflecting macroeconomic conditions
- **Purchasing Managers' Index (PMI)**: released monthly, with official and Caixin versions
- **Consumer Price Index (CPI)**: released monthly, indicating inflation
- **Urban Fixed Asset Investment**: released monthly, reflecting investment activity

### 3. US Dollar Index and Federal Reserve Policies

The USD trend directly influences USD to RMB exchange rate movements. The Federal Reserve and European Central Bank's monetary policies are often key drivers. In 2017, the Eurozone's robust economic recovery and ECB's signals of tightening monetary policy pushed the euro higher; meanwhile, after breaching 100, the dollar index weakened significantly, falling 15% for the year, leading to a decline in USD to RMB.

### 4. Official Exchange Rate Guidance Signals

Unlike fully market-driven currencies, the RMB has undergone multiple management reforms since 1978. The latest comprehensive adjustment in 2017 modified the RMB's central parity rate model from "closing price + a basket of currencies" to include an "inverse cycle factor," strengthening official guidance. In the short term, this influences exchange rate volatility, but the medium- to long-term trend still depends on market direction.

## Why Is Offshore RMB (CNH) More Volatile?

Offshore RMB, traded in markets like Hong Kong and Singapore, is less restricted in capital flows and better reflects global market sentiment, thus typically exhibiting higher volatility than onshore RMB (CNY). In 2025, CNH experienced multiple swings. Early in the year, US tariffs and a soaring dollar to 109.85 caused a temporary depreciation below 7.36. The PBOC issued 60 billion offshore bonds to absorb liquidity and stabilize the midpoint. Recently, with easing US-China relations and expectations of rate cuts, CNH has strengthened significantly, breaking below 7.05 on December 15, rebounding over 4% from the start of the year.

## Investment Strategy for Exchanging RMB Now

Based on the above analysis, exchanging for RMB now can be profitable, but timing is crucial:

**Short-term outlook:** RMB is expected to remain relatively strong, with oscillations inversely correlated with the dollar and limited amplitude. The probability of quickly falling below 7.0 before the end of 2025 is low; appreciation will be gradual.

**Key variables:** Future focus should be on three points—whether the USD index can continue weakening, whether the PBOC's midpoint rate signals remain clearly dovish, and the implementation pace of China's stabilizing growth policies.

**Historical reference:** Over the past five years, RMB appreciated sharply to around 6.3 during the COVID-19 pandemic in 2020; maintained relative strength in 2021; depreciated above 7.25 in 2022 amid aggressive US rate hikes; hovered around 7.0 in 2023; and increased volatility in 2024. This cyclical adjustment has persisted for years, with signs of a turning point, but reversals typically take time to fully materialize.

## Summary: The Logic Behind Future RMB Trends

As China enters a loose monetary policy cycle, the USD to RMB trend is becoming more defined. Based on historical experience, such cycles can last up to ten years, during which short- and medium-term fluctuations caused by dollar movements and unexpected events are common, but the overall direction remains relatively clear.

Investors who monitor the four key factors—US-China relations, central bank policies, economic data, and USD trends—can significantly improve their chances of profit. The macro factors influencing forex are mainly based on public data, with large trading volumes supporting two-way trading, making the market relatively fair and transparent for ordinary investors.

Is now a good time to exchange for RMB? Yes, but no need to rush. Patience is advised—wait for further weakening of the USD index or clearer signals from the PBOC before acting, which will yield better results.