## RMB Exchange Rate Turning Point in 5 Years: From Depreciation to Appreciation, Is Now a Good Time to Enter?

### Historical Review: Why Has the RMB Been Falling?

To judge whether exchanging USD for RMB is worthwhile now, we need to understand what has happened over the past five years.

**2020 Pandemic Outbreak**: The Federal Reserve slashed interest rates aggressively, yet the RMB appreciated, reaching around 6.5 by the end of the year. It was the most advantageous time to buy RMB—those exchanging USD for RMB made huge profits.

**Continued Appreciation in 2021**: The RMB remained strong, mainly due to China's booming exports and a healthy economy, with the exchange rate fluctuating steadily between 6.35 and 6.58.

**A Major Reversal in 2022**: The Fed aggressively raised interest rates, pushing the US dollar index to new highs. Meanwhile, strict COVID-19 measures in China hampered the economy, and the real estate crisis worsened. The RMB depreciated from 6.35 to over 7.25, a decline of about 8%, the largest in recent years. Exchanging RMB at this point was very disadvantageous.

**2023-2024**: The RMB continued to be under pressure, oscillating between 7.0 and 7.3, with little upward momentum. A turning point only appeared in 2025.

### Major Shift in 2025: Why Is the RMB Appreciating Now?

Entering **2025, the situation has completely changed**. The RMB ended the three-year depreciation spell from 2022 to 2024 and began showing signs of appreciation.

**USD to RMB Exchange Rate**: From around 7.3 at the start of the year, it gradually rebounded to fluctuate between 7.04 and 7.3, with an overall appreciation of about 3%. By **December 15**, the rate broke through 7.05 strongly, and continued rising, reaching a new high of **7.0404**, the highest in nearly 14 months.

**Offshore RMB (CNH)** performed even better, rising from a high of 7.4 at the start of the year, breaking 7.05 in December, with a rebound of over 4%, hitting a 13-month high.

Behind this appreciation are three main drivers:

**First, signs of easing in US-China trade relations**. Both sides recently reached a trade truce, with the US lowering tariffs and suspending new ones, and both countries agreeing to expand agricultural imports. This sent positive signals, stabilizing market sentiment.

**Second, the US dollar index has weakened from strong**. From 109 at the start of the year, it fell to the current range of 97.8-98.5, a decline of nearly 10%, the weakest first half since the 1970s. After the Fed entered a rate-cutting cycle, the dollar lost its appeal.

**Third, the RMB is seriously undervalued against the USD**. According to Goldman Sachs analysis, the real effective exchange rate of the RMB is undervalued by 12% compared to the ten-year average, and 15% against the USD. This indicates significant room for appreciation.

### Will the RMB continue to rise in the future? What do major international banks think?

**Deutsche Bank** predicts the USD to RMB exchange rate will rise to 7.0 by the end of 2025 and further to **6.7** by the end of 2026. This suggests further appreciation potential in the next 1-2 years.

**Goldman Sachs** has a bolder outlook. In a May report, they raised their 12-month RMB forecast from 7.35 to 7.0, and predicted that the "breaking 7" milestone could happen sooner than the market expects. Their logic is that China’s exports remain strong, and the government prefers to stimulate the economy with other policy tools rather than relying on currency depreciation.

### Is it a good time to buy RMB now? How should investors judge?

**In the short term, the profitability of exchanging USD for RMB depends on three variables:**

**USD Index Trend** — If the dollar continues to weaken, RMB appreciation will have momentum. Conversely, if the dollar rebounds, the RMB will face pressure. Currently, a mild dollar strengthening exerts some pressure on the RMB, but positive US-China agreements temporarily offset short-term impacts.

**RMB Central Parity Rate Signals** — The central bank’s stance on the exchange rate is crucial. The People’s Bank of China (PBOC) guides the market through daily central parity rates. A loose stance tends to weaken the RMB, while a strict stance stabilizes the rate.

**China’s Policies for Stable Growth** — The central bank may cut interest rates or reserve requirements to inject liquidity, which could temporarily weaken the RMB. However, if these policies are combined with fiscal stimulus that stabilizes the economy, the long-term outlook for the RMB will improve.

**Overall, investing in RMB-related currencies offers profit opportunities, but timing is key.** The RMB is expected to remain relatively strong in the short term, with fluctuations inversely correlated to the dollar, within a limited range. The rapid appreciation below 7.0 before the end of 2025 is less likely, but the appreciation trend over the next 1-2 years is relatively certain.

### To become a currency trend analyst for the RMB, you need to monitor these four factors:

**First, People’s Bank of China monetary policy** — Lowering interest rates and reserve requirements weakens the RMB; raising them strengthens it. Since 2014, when the central bank adopted easing policies, USD to RMB has risen from 6 to 7.4, demonstrating the power of monetary policy.

**Second, China’s economic data** — Stable economic growth attracts continuous foreign investment, increasing demand for the RMB. Conversely, economic slowdown leads foreign investors to shift elsewhere. Key indicators include GDP, PMI, CPI, and urban fixed asset investment.

**Third, USD index and Federal Reserve policies** — The dollar’s trend directly impacts exchange rates. In 2017, the European Central Bank signaled tightening, causing the euro to appreciate and the dollar index to fall 15%, with USD to RMB also declining. They are highly correlated.

**Fourth, official stance on the exchange rate** — The RMB is not a fully freely floating currency. The central bank guides the rate through the central parity quoting model (including counter-cyclical factors). Short-term influences are clear, but the medium to long-term depends on market direction.

### How will the RMB exchange rate move in 2026?

Looking ahead, three main factors are expected to drive the currency stronger:

**China’s continued resilient exports** — Despite complex global trade conditions, China’s exports remain competitive.

**Reallocation of foreign investment into RMB assets** — As the undervaluation becomes recognized, international investors are increasingly buying RMB assets.

**Structural weakness of the US dollar index** — High US fiscal deficits and unsustainable high interest rates limit the dollar’s upward potential.

**Overall, now is a relatively good time to exchange USD for RMB.** It’s not the absolute best (that was 2021), but the appreciation potential is clear, and risks are relatively manageable. However, watch out for variables like US-China relations; if tensions escalate, markets could turn volatile, and the RMB may weaken again.

### Visual Summary: Offshore RMB vs Onshore RMB

Since CNH trades in international markets like Hong Kong and Singapore with capital flows less restricted, it reflects global market sentiment more directly. CNY, under capital controls, is influenced by the central bank’s guiding interventions through the central parity and forex interventions, making **CNH more volatile**.

In 2025, despite multiple fluctuations, CNH overall showed a oscillating upward trend. Early in the year, US tariff policies caused a dip below 7.36, but the central bank took measures to stabilize the market. Recently, with warming US-China dialogue, economic policy adjustments, and expectations of Fed rate cuts, CNH has strengthened significantly, breaking 7.05 in December, rebounding sharply from the start of the year.

**In short, now is a good time to exchange for RMB, but don’t rush.** RMB appreciation is a medium- to long-term trend, not a short-term profit opportunity. Patience and risk management are the right approach for forex investing.