Is the renminbi depreciation reversal signal here? The USD to RMB exchange rate hits a new low this year

The RMB to USD exchange rate pattern has experienced a turning point. In recent weeks, the USD has accelerated its decline against the RMB, with the offshore market touching a 6.9965 low for the year, and the onshore market also breaking below the 7.0051 level. What are the driving forces behind this reversal?

Weakening USD, Policy Guidance, and Seasonal FX Settlement in One

The recent RMB appreciation is not accidental. First, the Fed’s rate cut cycle has suppressed the strength of the USD. The US Dollar Index has fallen over 10% since the beginning of the year, with a decline of more than 2% in the past month alone. Against the backdrop of global de-dollarization, a weak USD has laid the foundation for RMB appreciation.

Second, the stance of the People’s Bank of China (PBOC) is crucial. The central bank has continuously raised the midpoint of the RMB exchange rate (reference rate), sending a clear signal of appreciation expectations to the market, which constitutes policy support.

The third driver is the year-end FX settlement wave. In 2025, China’s export trade performed strongly, accumulating a large trade surplus. As the year-end approaches, companies are consolidating FX settlement and exchange, which directly boosts the RMB. Coupled with the PBOC’s delayed rate cuts and the tightening offshore liquidity due to holidays, these factors have strengthened the momentum for RMB appreciation.

Wang Qing, Chief Macro Analyst at Orient Securities, pointed out, “The weakening USD and exporters’ year-end FX settlement are the main drivers. The continued strength of the RMB is conducive to attracting foreign capital into the domestic capital markets.”

Is the RMB Still Undervalued? International Institutions’ Perspectives

From a deeper economic fundamental perspective, the market generally believes that the RMB has not yet fully appreciated.

Goldman Sachs holds the most aggressive view. They believe that, based on economic fundamentals, the RMB is undervalued by about 25%. Goldman Sachs forecasts that by mid-2026, USD to RMB could fall to 6.90, and further decline to 6.85 by the end of the year.

ANZ Bank’s senior strategist Xing Zhaopeng offers a more conservative range — expecting USD to RMB to fluctuate between 6.95 and 7.00 in the first half of 2026.

Bank of America emphasizes political factors. They believe that easing US-China relations will improve prospects for Chinese exporters, and the scale of USD selling by exporters in 2026 will further expand, ultimately expecting USD to RMB to fall to 6.80 by the end of 2026.

Investment Insights

This RMB appreciation cycle is positive for investors holding RMB assets. If you believe in the forecasts of the aforementioned institutions for 2026, the potential for USD to RMB depreciation still ranges between 0.15 and 0.35 yuan. This also explains why a large amount of foreign capital has recently increased its allocation to A-shares — driven by the dual attraction of RMB appreciation expectations and valuation recovery.