2026 RMB Exchange Rate Outlook: Has the Appreciation Cycle Started?

2025 RMB Trend Review

The RMB exchange rate in 2025 shows clear signs of a reversal. Throughout the year, USD to RMB fluctuated within 7.1-7.3, appreciating a total of 2.40%, breaking the three-year depreciation trend from 2022 to 2024. In the offshore market, USD to offshore RMB experienced slightly wider fluctuations (7.1-7.4), with an appreciation of 2.80%. This difference reflects the offshore market’s higher sensitivity to international factors.

In late November, driven by easing US-China relations and rising expectations of Fed rate cuts, the RMB appreciated against the USD, reaching a low of 7.0765, a near one-year high. This turning point undoubtedly attracted widespread market attention.

In the first half, RMB faced pressure mainly due to global tariff policy uncertainties and a strong US dollar index. Offshore RMB temporarily fell below 7.40, and USD to RMB hit record highs since the 2015 “8.11 reform,” with a depreciation of about 8% for the year. Factors such as strict domestic pandemic controls and a worsening real estate crisis also dampened market confidence.

In the second half, as US-China trade negotiations gradually advanced and the dollar index weakened, the RMB exchange rate stabilized and began to rebound.

How Professional Institutions View Future Trends

Currently, international investment banks are generally optimistic about the RMB outlook. Several institutions believe that the depreciation cycle starting in 2022 may have ended, and the RMB is expected to enter a new phase of medium- to long-term appreciation.

Deutsche Bank’s analysis indicates that recent RMB strength against the USD suggests a long-term appreciation cycle is beginning. The bank forecasts RMB to reach 7.0 by the end of 2025 and further appreciate to 6.7 by the end of 2026.

Morgan Stanley also expects the RMB to show moderate appreciation, with the USD remaining weak over the next two years. Their forecast suggests the dollar index could fall back to 89 by 2026, with the RMB/USD exchange rate reaching around 7.05.

Goldman Sachs’ global FX strategy team proposed a more aggressive view in May. They significantly raised their 12-month USD to RMB forecast from 7.35 to 7.0, suggesting that the “breaking 7” might happen sooner than market expectations. Their logic is that the current real effective exchange rate of RMB is undervalued by 12% relative to its 10-year average, with an even larger undervaluation of 15% against the USD. Under the dual influence of progressing US-China trade negotiations and RMB undervaluation, the RMB has ample room for appreciation.

Exchange Rate Evolution in the Past Five Years

Understanding the future trend of RMB requires reviewing its historical volatility.

2020: At the start, USD to RMB fluctuated between 6.9-7.0. Due to US-China trade tensions and the pandemic, it briefly depreciated to 7.18. As China’s pandemic controls proved effective and the economy recovered ahead of others, coupled with the Fed’s near-zero interest rates and China’s stable policies, RMB rebounded strongly to around 6.50 by year-end, appreciating about 6% for the year.

2021: China’s exports remained strong, the economy improved, and the central bank maintained stable policies. The USD index was subdued, with USD to RMB fluctuating narrowly between 6.35-6.58, averaging about 6.45, maintaining relative strength.

2022: A turning point year. The Fed’s aggressive rate hikes caused the USD index to surge, with USD to RMB rising above 7.25 from 6.35, depreciating about 8% for the year, the largest decline in recent years. Contributing factors included strict domestic pandemic policies and a worsening real estate crisis, which dampened market confidence.

2023: USD to RMB fluctuated between 6.83-7.35, averaging around 7.0, ending near 7.1. China’s economic recovery was below expectations, and ongoing real estate debt issues, along with a high US interest rate environment, kept RMB under pressure.

2024: The weakening of the USD eased RMB pressure. Chinese fiscal stimulus and real estate relief measures boosted confidence. USD to RMB rose from 7.1 to around 7.3 by mid-year, with offshore RMB briefly breaking below 7.10 in August. Volatility increased significantly.

Three Major Factors Supporting RMB Appreciation

Looking ahead to 2026, the market generally believes three forces will drive RMB strength:

Resilient exports. China’s export competitiveness in the global trade structure will continue to support RMB.

Reallocation of foreign assets into RMB. As appreciation expectations improve, overseas institutions and individuals’ demand for RMB assets is expected to rebound, creating positive feedback.

Structural weakness of the US dollar index. Long-term Fed rate cuts and US twin deficits are likely to constrain USD gains over time.

Core Variables Influencing Exchange Rate Trends

For investors, understanding the following key factors is crucial:

USD Index trajectory. In the first five months of 2025, the USD index fell by 9%, marking the worst start to a year historically. Market consensus expects the Fed’s rate cut cycle to drive short-term rates down, which could lead to continued appreciation of Asian currencies, including RMB.

US-China trade attitude. Although recent signs of easing exist, negotiations remain risky with potential setbacks. Escalation of tariffs could reintroduce RMB depreciation pressure; continued easing would support RMB.

Fed policy pace. The magnitude and timing of rate cuts directly impact USD. If inflation remains above target, the Fed may slow rate cuts, supporting the dollar; if the economy slows significantly, accelerated rate cuts could weaken USD. RMB generally moves inversely to the USD index.

PBOC stance. Loose monetary policy typically exerts downward pressure on RMB, but if combined with strong fiscal stimulus stabilizing the economy, it can be beneficial for RMB in the long run.

RMB internationalization. Increased use in global trade settlement and expansion of central bank currency swap agreements will enhance RMB stability over the long term.

How to Assess RMB Exchange Rate Trends

It’s better to teach how to fish than to give fish. Investors can analyze RMB prospects independently from the following perspectives:

Monetary policy signals. Central bank rate cuts and reserve requirement ratio adjustments directly influence liquidity and money supply. Looser policies may temporarily weaken RMB but can be positive if they boost economic growth. Pay close attention to changes in benchmark lending rates and reserve ratios.

Economic fundamentals. Data such as GDP, PMI, CPI, and fixed asset investment reflect economic health. Improving fundamentals attract foreign investment, increasing RMB demand.

US dollar performance. Fed policies and ECB moves greatly impact USD. Historically, when the Eurozone economy recovers and USD weakens, the USD index can fall by 15% annually, with USD/RMB also declining.

Official exchange rate guidance. Although RMB marketization has increased, the PBOC still influences via the central parity mechanism (including countercyclical factors). This has a short-term impact on exchange rates, but the long-term trend depends on market direction.

Current Opportunities for Investing in RMB

Based on the above analysis, there are indeed profit opportunities in investing in RMB-related currency pairs at this moment, with the key being timing.

In the short term, RMB is expected to remain relatively strong, with fluctuations inversely correlated with the USD, within a limited range. The probability of rapid appreciation below 7.0 before the end of 2025 is low. Investors should focus on USD index trends, RMB central parity signals, and the strength and pace of China’s growth stabilization policies.

Ways for Different Investors to Participate

For investors interested in the forex market, multiple channels are available:

Commercial banks. Investors can open foreign exchange accounts at local or international banks for trading and investment.

Forex trading platforms. Partner with mainstream forex brokers to use online trading platforms. These typically support both long and short positions, allowing profit from rising or falling prices.

Leverage trading. Most platforms support leverage, enabling traders to control larger positions with less capital. However, leverage amplifies risks; it should be used prudently according to risk tolerance.

Securities firms. Some securities companies offer forex trading services.

Futures exchanges. Investors can trade forex via futures markets by opening accounts for forex futures trading.

When choosing a platform, consider regulatory compliance, platform size, trading costs, and risk management tools.

Summary and Outlook

As China enters a sustained easing cycle of monetary policy, USD to RMB shows clear long-term trend characteristics. Based on historical similar cycles, such a trend could last several years or even a decade, with short- to medium-term fluctuations driven by USD volatility and geopolitical events.

If investors grasp the key factors influencing RMB—US policy, US-China relations, domestic economic performance, and PBOC stance—they can significantly improve profit prospects. Compared to stock markets, the forex market benefits from large participant base, high liquidity, and relatively transparent information, making it a fairer and more advantageous investment choice for retail investors, offering both long and short opportunities.