RMB to USD and EUR exchange rates hit new highs again: Will it continue to appreciate in 2026?

Since 2025, the Chinese Renminbi (RMB) has shown a clear reversal trend. During the first half of this year, it was under pressure, with the offshore market even breaking below 7.40, hitting a record low since the 2015 exchange rate reform. However, in the second half, the situation changed dramatically. By the end of November, driven by factors such as easing US-China trade tensions and rising expectations of Federal Reserve rate cuts, the RMB against the US dollar appreciated steadily, reaching a low of 7.0765, the highest in nearly a year.

Meanwhile, against the backdrop of the EU economic recovery, the RMB’s exchange rate against the euro also warrants attention. As global central bank policies diverge, the EUR/RMB exchange rate has exhibited more diverse characteristics, providing new trading opportunities for investors.

The cycle turning point of the RMB exchange rate has been established

From 2022 to 2024, the RMB experienced a three-year depreciation cycle. Now, this cycle appears to have peaked. The latest forecasts from multiple international investment institutions point in the same direction: The RMB has entered an appreciation channel as a certainty.

Deutsche Bank believes that the RMB against the US dollar could rise to 7.0 by the end of 2025 and further strengthen to 6.7 by the end of 2026. Morgan Stanley expects the US dollar index to fall back to 89, corresponding to an RMB exchange rate of about 7.05. Goldman Sachs has even more aggressively revised its RMB forecast for the next 12 months from 7.35 to 7.0, noting that the RMB against the dollar is currently undervalued by 15%.

The logic behind these forecasts is worth pondering: the current effective real exchange rate of the RMB is undervalued by 12% compared to the ten-year average, China’s export resilience remains strong, and signals of easing US-China trade negotiations all create favorable conditions for RMB appreciation.

Three major driving factors support the medium- to long-term strength of the RMB

China’s exports continue to demonstrate resilience

Since 2025, China’s export performance has been outstanding. This solid trade foundation provides strong support for the RMB. Stable demand for Chinese goods from foreign investors also means increased demand for the RMB.

Foreign capital begins reallocating into RMB assets

After the adjustment period from 2022 to 2024, more and more international investors are reassessing the attractiveness of RMB assets. This round of capital re-entry will undoubtedly strengthen the RMB’s upward momentum.

Structural weakness of the US dollar index has become a trend

In the first half of 2025, the US dollar index declined by a total of 9%, marking the worst start to the year in history. The upcoming Fed rate cut cycle suggests the dollar will continue to be under pressure, while Asian currencies, including the RMB, are expected to continue appreciating.

Key variables influencing the future trend of the RMB

To forecast the RMB’s future performance, attention should be paid to the following dimensions:

Federal Reserve policy pace

The magnitude and timing of rate cuts directly impact the dollar. If inflation remains high, causing the Fed to slow down rate cuts, the dollar may find support; conversely, if the economy slows significantly, accelerating rate cuts will weaken the dollar. The RMB and USD usually move inversely.

US-China trade relations

Although recent negotiations show signs of easing, the durability of the trade war remains uncertain. If conflicts escalate, the RMB will face renewed depreciation pressure; if easing continues, the RMB will receive sustained support.

Chinese central bank policy orientation

The People’s Bank of China tends to maintain an accommodative monetary policy to support economic recovery. However, this also brings potential depreciation pressure. If accommodative policies are combined with strong fiscal stimulus to stabilize the economy, the RMB will be supported in the long term.

Progress of RMB internationalization

The increasing role of the RMB in global trade settlement and expanding currency swap agreements will support the RMB’s stability over the medium to long term.

How the RMB exchange rate has evolved based on historical patterns

Looking back over the past five years, RMB fluctuations have been closely linked to macro factors:

In 2020, amid the pandemic shock, the RMB depreciated from the 6.9-7.0 range at the start of the year to 7.18, but then rebounded strongly to 6.50 as China’s economy led the recovery, appreciating about 6% for the year.

In 2021, China’s exports remained strong, the central bank maintained a prudent policy, and the US dollar index was subdued, keeping the RMB’s annual average stable at around 6.45.

In 2022, aggressive Fed rate hikes, a soaring dollar, and economic pressures in China caused the RMB to depreciate from 6.35 to over 7.25, with the largest decline in recent years.

In 2023, the dollar remained high, and the RMB fluctuated between 6.83 and 7.35.

In 2024, the dollar weakened, fiscal stimulus boosted expectations, and the RMB gradually rebounded.

From this pattern, monetary policy, economic growth, and trade performance are the three pillars determining the long-term trend of the RMB.

Framework for judging RMB-related investment products

For investors, predicting RMB movements is not complicated; the key is to monitor the following indicators:

Monetary policy signals

Central bank actions such as rate cuts and reserve requirement ratio reductions directly influence liquidity and exchange rate expectations. Loose policies usually exert short-term downward pressure on the RMB, but long-term economic recovery can provide support.

Economic data performance

GDP, PMI, CPI, fixed asset investment, and other data collectively depict China’s economic health. Stable growth attracts foreign capital inflows, supporting the RMB; slowing growth has the opposite effect.

US dollar index trends

The relative strength of Fed and European Central Bank policies determines the dollar index’s direction, directly affecting USD/RMB exchange rate movements.

Official exchange rate guidance

The People’s Bank of China influences the exchange rate through the midpoint pricing mechanism. This has a noticeable short-term impact, but the overall direction is still dominated by market forces in the medium to long term.

How global investors can participate in RMB trading

Through commercial banks

Investors worldwide can open foreign exchange accounts at local or international banks to trade RMB and other currencies.

Foreign exchange margin trading

Many forex platforms support two-way trading and leverage tools, allowing investors to go long or short and adjust positions flexibly based on exchange rate movements. These platforms typically offer risk management tools like stop-loss, take-profit, and trailing stops to help control risk exposure.

Securities firms’ channels

Some securities companies also provide forex trading services, enabling investors to trade RMB and other currency pairs on their platforms.

Participation in futures markets

Through futures exchanges, investors can engage in foreign exchange futures trading, participating in diversified risk management and speculative strategies.

Summary

The RMB exchange rate has reached a new turning point. Based on the evolution of similar historical cycles, the current appreciation trend may continue for many years. Although fluctuations caused by US dollar volatility and trade policy shocks are inevitable, the overall direction is set. Investors should closely monitor key variables such as Federal Reserve policies, US-China relations, Chinese economic data, and EUR/RMB exchange rate trends to seize opportunities during this appreciation cycle. The forex market is driven mainly by macro factors, with transparent data and a two-way trading mechanism ensuring market fairness, providing ordinary investors with relatively equal opportunities for profit.