Renminbi to US Dollar exchange rate forecast before the end of 2025: Will the appreciation window open or is it just a false alarm?

The Renminbi Exchange Rate Faces a Turning Point—Emerging from a Three-Year Depreciation Cycle

The performance of the Renminbi in 2025 has shown a rhythm markedly different from the past three years. After consecutive depreciation from 2022 to 2024, this year the Renminbi against the US dollar has exhibited a clear rebound trend. As of mid-December, the USD/RMB exchange rate has broken through the 7.05 barrier, reaching a low of 7.0404, the best level in nearly 14 months.

This shift is not coincidental. Although in the first half of the year, due to global tariff policy uncertainties and a strengthening US dollar index, the Renminbi was pressured to around 7.40, in the second half, with progress in US-China trade negotiations and a weakening dollar index, the Renminbi began to show significant resilience. To date, the USD/RMB has appreciated about 3% year-to-date, while the offshore market (CNH) fluctuates between 7.02 and 7.4, reacting more sensitively to international market sentiment than the onshore market (CNY).

Four Key Forces Driving the Rise and Fall of the Renminbi against the US Dollar

The ebb and flow of the US dollar index

In the first half of 2025, the dollar index fell from 109 at the start of the year to 98, a decline of nearly 10%, marking the weakest start since the 1970s. However, after November, expectations of Fed rate cuts cooled, and the US economy outperformed expectations, leading to a rebound in the dollar index. Although the Fed’s December rate cut brought the index back to around 97.869, this “strength→weakness→strength” oscillation accurately reflects the current forex market.

Substantive progress in US-China trade negotiations

In the latest round of talks in Kuala Lumpur, the US agreed to reduce tariffs related to fentanyl from 20% to 10%, and to suspend the 24% retaliatory tariffs until November 2026. Both sides also reached consensus on delaying rare earth export controls and expanding agricultural product purchases. However, the durability of such agreements is uncertain, as the swift breakdown of the Geneva agreement in May serves as a warning. Therefore, whether US-China frictions will escalate again directly influences whether the Renminbi can maintain its current appreciation momentum.

The policy game between the Federal Reserve and the People’s Bank of China

The monetary policy of the Fed is crucial to the dollar’s direction. If inflation remains higher than expected in 2025, the Fed may slow down rate cuts, supporting the dollar; otherwise, it could weaken the dollar. Meanwhile, the People’s Bank of China tends to adopt easing policies to support economic recovery, which usually exerts downward pressure on the Renminbi. However, if easing is combined with strong fiscal stimulus that stabilizes the economy, it could instead boost the long-term outlook for the Renminbi. The Renminbi and the dollar index often move inversely, and this pattern remains valid today.

Slow progress in the internationalization of the Renminbi

The penetration of the Renminbi in global trade settlement is increasing year by year, and currency swap agreements with various countries are expanding. These factors provide long-term support for the Renminbi, but in the short term, the US dollar’s status as the world’s primary reserve currency remains difficult to shake.

How Do Institutions View It? Deutsche Bank and Goldman Sachs’ Optimistic Forecasts

Currently, the market generally believes that the Renminbi exchange rate is at a cycle turning point. Several international investment banks have expressed optimistic expectations for the Renminbi’s trend over the next 12 to 24 months.

Deutsche Bank analysts suggest that the recent strength of the Renminbi against the dollar may signal the start of a long-term appreciation cycle. They estimate that the Renminbi will appreciate to around 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Goldman Sachs’ FX strategy team has significantly upgraded its medium-term forecast, lowering the 12-month USD/RMB forecast from 7.35 to 7.0. Their reasoning is that the current real effective exchange rate of the Renminbi is undervalued by 12% relative to the ten-year average, with an even greater undervaluation of 15% against the dollar. Based on trade negotiations and the current undervaluation, Goldman Sachs believes the Renminbi may reach 7.0 sooner than the market expects. Additionally, Goldman Sachs points out that strong Chinese exports will support the Renminbi, while the Chinese government prefers to use other policy tools to boost the economy rather than relying on currency depreciation.

Is the Renminbi Worth Watching at This Stage?

From the current situation, there are indeed profit opportunities related to the Renminbi, but timing is crucial.

In the short term, the Renminbi is expected to remain relatively strong, oscillating inversely to the dollar within a limited range. The rapid appreciation below 7.0 before the end of 2025 is less likely. Going forward, three variables should be closely monitored: the turning point of the US dollar index, signals of the Renminbi’s midpoint rate adjustments, and the implementation pace and strength of China’s stabilizing growth policies. These factors will directly influence whether the Renminbi’s mid-term trend can continue its current appreciation trajectory.

How to Independently Judge the Renminbi’s Exchange Rate Trends?

Instead of passively waiting for institutional forecasts, it’s better to master proactive judgment methods. Although the changes in the Renminbi exchange rate are complex, they can always be interpreted from the following dimensions:

First: The People’s Bank of China’s monetary policy stance

Monetary policy tightness or looseness directly impacts the money supply, thereby affecting the exchange rate. Easing policies (rate cuts, reserve requirement reductions) increase the expected money supply, leading to a weaker Renminbi; tightening policies have the opposite effect. For example, in 2014, the PBOC cut interest rates six times consecutively and significantly lowered reserve requirements, during which the USD/RMB rose from 6 to 7.4, illustrating the profound influence of central bank policies on the exchange rate.

Second: China’s economic fundamentals

When China’s economy maintains stable growth and outperforms other emerging markets, foreign capital inflows increase, boosting demand for the Renminbi and strengthening its exchange rate. Conversely, the Renminbi weakens. Key indicators include quarterly GDP growth, Purchasing Managers’ Index (PMI), Consumer Price Index (CPI), and urban fixed asset investment.

Third: The overall trend of the US dollar index

USD/RMB is highly correlated with the dollar index. The policy orientation of the Federal Reserve and the European Central Bank is critical. Historically, in 2017, the Eurozone economy exceeded expectations, and the ECB signaled tightening, pushing the euro higher, while the dollar index fell 15% for the year, and USD/RMB also declined accordingly.

Fourth: The policy orientation of official exchange rate management

Since reform and opening-up, the Renminbi has undergone multiple exchange rate system reforms. The last major adjustment in 2017 introduced the “countercyclical factor,” strengthening the central bank’s guiding role. In the short term, such adjustments have a noticeable impact on the exchange rate, but the medium- and long-term trend still depends on the overall direction of the currency market.

The Renminbi Exchange Rate Trajectory Over the Past Five Years

2020: Strong rebound after pandemic shock

At the start of the year, USD/RMB was in the 6.9-7.0 range. Due to trade tensions and the pandemic, it depreciated to 7.18 in May. But as China led global pandemic control and economic recovery, coupled with the Fed’s near-zero interest rates and China’s steady policies, the interest rate differential drove the Renminbi to rebound strongly to around 6.50 by year-end, appreciating about 6%.

2021: Steady performance amid wide fluctuations

China’s exports remained strong, the central bank maintained steady policies, and the dollar index hovered at low levels. USD/RMB traded within 6.35-6.58 throughout the year, with an average around 6.45, showing relative strength.

2022: The start of a depreciation cycle

This year marked a turning point. The Fed’s aggressive rate hikes pushed the dollar index higher, with USD/RMB rising from 6.35 to over 7.25, depreciating 8% for the year—the largest decline in recent years. Meanwhile, China’s strict pandemic policies hampered the economy, and a real estate crisis worsened, leading to low market confidence.

2023: Searching for a bottom amid volatility

USD/RMB fluctuated between 6.83 and 7.35, with an average of 7.0, ending the year slightly higher at 7.1. China’s economic recovery fell short of expectations, the real estate debt crisis persisted, consumption remained sluggish, and the US maintained high interest rates, exerting downward pressure on the Renminbi.

2024: Relief from a weakening dollar

The dollar’s weakening eased pressure on the Renminbi, with fiscal stimulus and real estate support policies boosting confidence. The exchange rate rose from 7.1 to around 7.3 mid-year, with offshore Renminbi breaking below 7.10 in August to hit a six-month high, with increased volatility.

The Difference Between Offshore (CNH) and Onshore (CNY) Renminbi

Because offshore Renminbi trades in international markets like Hong Kong and Singapore, with capital flows less restricted, it more directly reflects global market sentiment, often showing more dramatic fluctuations. In contrast, CNY is subject to capital controls, with the People’s Bank guiding the exchange rate through daily midpoint rates and forex interventions, resulting in more moderate movements.

The performance of CNH against the dollar in 2025 exemplifies this characteristic. Early in the year, under the dual impact of US tariff shocks and a soaring dollar index to 109.85, CNH depreciated past 7.36. The People’s Bank of China then issued 60 billion yuan of offshore bills to absorb liquidity and tightened the midpoint rate. Recently, with easing US-China negotiations, China’s stabilizing growth policies, and rising expectations of Fed rate cuts, CNH has strengthened significantly, breaking below 7.05 on December 15, rebounding over 4% from the year’s high, and hitting a 13-month high.

Overall Outlook

As China enters a sustained easing cycle in monetary policy, the USD/RMB exchange rate is likely to develop a clear trend, which, based on similar historical cycles, can last up to ten years. Although short-term fluctuations will occur due to dollar movements and external events, understanding the four key factors above can greatly improve investors’ judgment accuracy regarding the Renminbi. The forex market is primarily macro-driven, with data transparency from various countries, large trading volumes supporting two-way trading, making it more fair and participatory than other markets.