Behind the Accelerated Appreciation of the Renminbi: Central Bank Driver or Market Driven? Key Window Period in 2026

The RMB has recently experienced explosive strength against the US dollar, suddenly breaking below the long-term resistance level of 7 at the end of the year. On December 25, the offshore RMB (USD/CNH) quoted at 6.9965, hitting a six-month low; the onshore RMB (USD/CNY) also fell to 7.0051, the strongest performance since May 2023.

Three Forces Converge: Why Is the RMB Suddenly Gaining Strength?

On the surface, it’s just a numerical breakthrough, but behind it are subtle shifts in global monetary policies.

The US dollar’s weakening has become the primary driver. The Federal Reserve has entered a rate-cutting cycle, accelerating the de-dollarization trend worldwide. The US dollar index has fallen over 10% this year, dropping more than 2% in the past month alone. Against this backdrop of dollar weakness, the RMB naturally appreciates relative to the dollar. This logic applies similarly to other major currencies—such as the GBP against the RMB, JPY against the RMB, and other international currency pairs are experiencing similar re-pricing.

The invisible hand of China’s central bank is even more critical. Throughout 2025, the central bank has continuously raised the midpoint of the RMB exchange rate (reference rate) at the foreign exchange trading center, effectively signaling: allowing the RMB to gradually appreciate. This is not a spontaneous market movement but a policy-guided outcome.

Year-end settlement rush acts as a catalyst. Chinese exporters engage in seasonal currency settlement at year-end, converting large amounts of USD into RMB, creating a wave of “selling USD to buy RMB” demand. Coupled with tight liquidity before the Spring Festival, offshore liquidity is strained, further pushing up the RMB’s value.

Wang Qing, Chief Macro Analyst at Orient Securities, straightforwardly states: “The weakening dollar and seasonal currency settlement by exporters jointly drove the RMB’s strength.” He also points out that the continued appreciation of the RMB is actually beneficial for China’s capital markets, attracting more foreign investment.

The RMB Is Actually Undervalued

This is an interesting paradox—the RMB has risen to a near two-year high, yet many institutions believe it is still undervalued.

Goldman Sachs is the most direct: the RMB is undervalued by 25% relative to China’s economic fundamentals. They forecast that by mid-2026, USD/CNY will fall to 6.90, and by the end of the year further depreciate to 6.85.

The ANZ Bank’s forecast is slightly more conservative, expecting USD/CNY to fluctuate between 6.95 and 7.00 in the first half of 2026, implying room for further RMB appreciation.

Bank of America has the most distant outlook: they believe that easing US-China relations will stimulate Chinese exporters to accelerate USD selling, expecting USD/CNY to fall to 6.80 by the end of 2026. This forecast suggests the RMB will appreciate by more than 3% over the next year.

Key Variables in 2026

Whether the RMB will continue to appreciate depends mainly on three factors:

Monetary policy direction. The central bank has not further cut interest rates this year, which increases the attractiveness of the RMB. If China adopts a more aggressive easing policy in 2026, the upward pressure on the RMB might weaken.

Changes in trade patterns. China’s trade surplus accumulated significantly in 2025. If this momentum continues into 2026, the demand for currency settlement will persist, providing support for the RMB.

Probability of a rebound in the US dollar index. If the global economy unexpectedly improves, the Fed might pause rate cuts, causing the dollar to rebound. This poses the greatest risk to RMB appreciation.

From the current consensus, the overall trend of RMB appreciation in 2026 is certain, with the main question being the magnitude. Diverging international monetary policies, sustained trade surpluses, and central bank policy guidance all point in the same direction—the RMB will continue to strengthen.