The RMB appreciates to a new high again, is there room for further appreciation in 2026?

Beijing Time December 25th, the RMB to USD exchange rate broke through the key psychological barrier of 7. The offshore RMB fell to 6.9965, hitting a new low since September, while the onshore RMB also retreated to 7.0051. Behind this breakthrough, it reflects changes in the global exchange rate landscape and also signals that RMB appreciation may become the main theme in 2026.

Why Did the RMB Suddenly Strengthen? Three Factors Contributing

This round of RMB appreciation is not accidental but the result of multiple factors working together. First, the US dollar index is under pressure. Influenced by the Federal Reserve’s rate cuts and the global de-dollarization wave, the dollar index has fallen more than 10% this year, with a decline of over 2% in the past month. The weakening of the US dollar directly enhances the relative value of the RMB.

Second, the People’s Bank of China actively guides appreciation. Data from the China Foreign Exchange Trade System shows that the central bank continuously raises the RMB midpoint rate, encouraging RMB appreciation through stable policy guidance, which aligns with policies to expand capital market openness and attract foreign investment.

Third, the year-end foreign exchange settlement surge combined with liquidity factors. As China’s trade surplus continues to accumulate in 2025, companies compete to settle foreign exchange at year-end. Meanwhile, the approaching holiday leads to tighter offshore liquidity, further boosting the RMB. Additionally, the central bank’s decision not to cut interest rates further also reflects control over the RMB exchange rate.

Wang Qing, Chief Macro Analyst at Orient Securities, pointed out, “The weakening US dollar combined with seasonal foreign exchange needs of exporters is the core driver of RMB appreciation. Continuous RMB appreciation will significantly enhance China’s capital market attractiveness to international investors.”

RMB Undervalued by 25%, Significant Appreciation Potential in 2026

Although the RMB has already broken through the 7 mark, from an economic fundamentals perspective, there is still room for appreciation. Research from multiple international investment banks indicates that based on trade-weighted indices and economic fundamentals, the RMB still has upward potential.

Goldman Sachs’s analysis is the most optimistic. The bank believes that the RMB is undervalued by 25% relative to economic fundamentals, and expects the USD to RMB to further fall to 6.90 by mid-2026, with a possibility of reaching 6.85 by the end of the year.

ANZ Bank senior strategist Xing Zhaopeng holds a more moderate view, believing that in the first half of 2026, USD to RMB may fluctuate between 6.95 and 7.00, implying a gradual appreciation process.

The most optimistic forecast comes from Bank of America. The bank believes that easing tensions in US-China relations will improve Chinese exporters’ outlook, and the scale of USD selling by domestic exporters in 2026 is expected to further expand, pushing the USD to RMB to fall to 6.80 by the end of 2026.

The consensus behind these forecasts is: the RMB appreciation trend is already established; the key question is not “whether to appreciate” but “how much to appreciate.”