## 2026 RMB Exchange Rate Trend: Is an Appreciation Cycle Really Coming?

What happened to the RMB last year? Simply put, it was a "reversal."

After three consecutive years of depreciation against the US dollar from 2022 to 2024, 2025 saw a turning point for the RMB. The **USD to RMB exchange rate** remained mostly between 7.04 and 7.3 throughout the year. By mid-December, it had broken through the 7.05 mark, reaching 7.0404, the highest in nearly 14 months. The offshore market performed even more impressively, with USD to offshore RMB fluctuating between 7.02 and 7.4, reflecting a changing international market attitude toward the RMB.

Looking at it from a different angle: if 2022-2024 was the "downtrend" for the RMB, then 2025 is the "rebound signal." The annual appreciation of about 3% may not seem much, but this signal is very significant.

## Why Is the RMB Starting to Strengthen?

It's clearest when dividing last year into two halves.

**First half: bleak**: Global tariff policy uncertainties increased, the US dollar index strengthened from 109 at the start of the year, and offshore RMB once broke below 7.40. The USD to RMB even hit a new record since the 2015 "8.11 reform." At that time, the market was generally bearish on the RMB.

**Second half: reversal**: Progress was made in US-China trade negotiations, with both sides reaching consensus in Kuala Lumpur—US tariffs on fentanyl-related goods were reduced from 20% to 10%, and the 24% additional tariff was suspended until November 2026. Meanwhile, the US dollar index began to weaken, reaching 97.869 in November, then falling back to the 97.8-98.5 range. With the Federal Reserve's December rate cut, the USD index continued to be under pressure, and the RMB rebounded accordingly.

**The core logic is**: Weak USD + easing US-China relations + market expectations shifting = RMB appreciation window opening.

## Four Major Variables Affecting the USD to RMB Exchange Rate

To judge whether the RMB will continue to rise in the future, these four factors are indispensable:

**1. USD Index Trend**
A strong dollar means a weak RMB, which is the most direct influence. In the first half of 2025, the USD index fell from 109 to 98, a nearly 10% drop—the weakest first half since the 1970s. But in November, it rebounded due to market expectations of less aggressive Fed rate cuts. Currently, with the Fed having cut rates, if economic data remains strong and inflation stays high, the USD could strengthen again, putting pressure on the RMB.

**2. Stability of US-China Negotiations**
The December trade truce was good news, but risks remain. A similar agreement reached in Geneva in May quickly fell apart. If tensions escalate again, the forex market could face renewed pressure, and the RMB risks turning weaker.

**3. People's Bank of China's Policy Orientation**
China's central bank tends to maintain an accommodative policy to support economic recovery, especially amid a sluggish real estate sector. Rate cuts or reserve requirement ratio reductions will release liquidity, usually exerting downward pressure on the RMB. However, if easing policies are combined with fiscal stimulus to stabilize the economy, it could instead support the RMB long-term.

**4. The Fed's Rate Cut Pace**
The RMB and USD usually move inversely. If the Fed continues to cut rates, the USD will weaken, and the RMB could appreciate; vice versa. Future rate cut magnitude and timing will depend on inflation data, employment figures, and other factors.

## How Do Banks View It? Three Different Exchange Rate Predictions

**Deutsche Bank**: The RMB has entered a long-term appreciation cycle. It is expected to reach 7.0 by the end of 2025 and further appreciate to 6.7 by the end of 2026.

**Goldman Sachs**: The USD to RMB will rise to around 7.0 in 2025. The main reason is that the RMB's real effective exchange rate is undervalued by 12% relative to the ten-year average, and 15% undervalued against the USD, leaving room for correction. Goldman Sachs believes China's strong export performance and the government's preference for using other policy tools rather than currency depreciation to stimulate the economy support the RMB.

**Market Consensus**: The RMB exchange rate may be at a cyclical turning point, shifting from depreciation to appreciation, with the potential to enter a medium- to long-term upward trend.

## Is It a Good Time to Buy RMB Now? What Investors Should Know

In the short term, the RMB is expected to remain relatively strong, but with limited amplitude, fluctuating inversely with the USD. Rapid appreciation below 7.0 before the end of 2025 is unlikely.

In other words: **Opportunities exist, but don’t expect a surge.**

Focus on three key factors moving forward: **USD index trend**, **RMB midpoint policy signals**, and **China’s growth stabilization policies**.

## How to Judge the Next Direction of the RMB? Practical Investment Logic

It’s better to teach you how to fish than just give you fish. Here are four ways to assess the RMB exchange rate, which will be useful regardless of market changes:

**Monitor monetary policy**
The People's Bank of China's easing or tightening directly affects money supply and thus the exchange rate. Easing (rate cuts, reserve requirement ratio reductions) usually weakens the RMB; tightening (rate hikes, reserve ratio increases) tends to strengthen it. For example, in 2014, the central bank launched an easing cycle, cutting rates and reserve ratios repeatedly, causing USD/RMB to rise from 6 to nearly 7.4.

**Watch economic data**
Stable economic growth in China attracts foreign investment inflows, increasing demand for the RMB and supporting its appreciation. Conversely, economic slowdown or downturns weaken the RMB. Key indicators include GDP, PMI, CPI, urban fixed asset investment, etc.

**Observe USD movements**
USD trends are highly correlated with the RMB. The policies of the Fed and the European Central Bank often determine USD direction. For example, in 2017, the European economy recovered faster than expected, and the ECB signaled tightening, boosting the euro. The USD index fell 15% that year, and the USD/RMB also declined accordingly.

**Pay attention to official stance**
Since 1978 reform and opening-up, the RMB has undergone multiple exchange rate reforms. The 2017 improved quotation model added a "counter-cyclical factor," strengthening the central bank’s guidance of the RMB. Signals from the midpoint fixing often have a significant short-term impact on the exchange rate.

## Five-Year Review: What Stages Has the RMB Gone Through?

**2020**: Early in the year, USD/RMB was between 6.9-7.0. Due to US-China trade tensions and the pandemic, it depreciated to 7.18 in May. Later, China quickly controlled the pandemic, economic recovery accelerated, and with the Fed’s near-zero rate, the interest rate differential supported the RMB. By year-end, it rebounded strongly to around 6.50, appreciating about 6% for the year.

**2021**: China’s exports remained strong, the economy improved, and the central bank maintained a prudent policy. The USD index stayed low, and USD/RMB fluctuated narrowly between 6.35 and 6.58, maintaining relative strength.

**2022**: Turning point. The Fed aggressively raised interest rates, and the USD index soared, pushing USD/RMB above 7.25 from around 6.35, a decline of about 8% for the year—the largest in recent years. Meanwhile, China’s pandemic control policies and real estate crisis dragged on the economy.

**2023**: USD/RMB fluctuated between 6.83 and 7.35, averaging around 7.0. China’s economic recovery was weaker than expected, and the ongoing real estate difficulties, combined with high US interest rates, kept the RMB under pressure.

**2024**: The weakening USD eased pressure on the RMB. Fiscal stimulus and support for real estate boosted confidence. USD/RMB rose from 7.1 to around 7.3 mid-year, with increased volatility. Offshore RMB broke below 7.10 in August, hitting a six-month high.

## Why Is Offshore RMB More Volatile?

Offshore RMB (CNH), traded freely in markets like Hong Kong and Singapore, reflects global market sentiment more directly due to unrestricted capital flows, resulting in more volatility. Onshore RMB (CNY), guided by the People's Bank of China’s daily midpoint and forex interventions, tends to be more stable.

In 2025, CNH’s performance confirmed this. Early in the year, under US tariff policies and USD soaring to 109.85, CNH broke below 7.36. The PBOC took measures to stabilize the market, issuing 60 billion yuan in offshore bills to recover liquidity and strictly controlling the midpoint. Recently, with easing US-China trade tensions, China’s growth policies taking effect, and market expectations of Fed rate cuts warming up, CNH strengthened significantly, breaking below 7.05 on December 15, rebounding over 4% from the year's high, and hitting a 13-month high.

## Final Words

As China enters a monetary easing cycle, the **USD to RMB exchange rate** has shown a clear trend. Based on similar historical policy-driven cycles, this can last up to ten years. Short- to medium-term movements will be influenced by USD fluctuations and other events, but the long-term direction is now clearer.

By understanding the key factors influencing the RMB—USD, policies, economic data, official stance—investors can greatly improve their profit prospects. The forex market is driven by macro factors, with transparent data and large trading volumes supporting two-way trading, making it a relatively fair and advantageous investment for individual investors.