RMB breaks through the 7 psychological threshold, is there room for further appreciation by 2026?

The RMB against the US dollar hits a new high for the year. On December 25, the offshore RMB (USD/CNH) fell to 6.9965, hitting a new low since September 2024; the onshore RMB (USD/CNY) dropped to 7.0051, reaching a new low since May 2023. This means the RMB/USD exchange rate has broken through the psychological barrier of 7 for the first time, which the market generally interprets as a positive signal.

The Three Main Drivers Behind the RMB Appreciation

The recent RMB appreciation against the USD is not accidental. First, the US dollar has weakened. The Federal Reserve has entered a rate cut cycle, coupled with a global de-dollarization wave. The US dollar index has fallen more than 10% this year, with a decline of over 2% in the past month, creating conditions for the RMB to appreciate relatively.

Second, the central bank’s policy guidance. Observing the midpoint rate of USD to RMB published by the China Foreign Exchange Trading Center shows that the central bank has been continuously raising the midpoint rate this year, sending a clear signal of support for RMB appreciation, which has formed a strong directional expectation in the foreign exchange market.

The third factor comes from year-end foreign exchange settlement. China accumulated a huge trade surplus in 2025. As the year-end approaches, companies are集中办理结汇需求, converting large amounts of USD into RMB, further pushing up the RMB against the USD. Additionally, the central bank’s delay in further rate cuts, along with tight offshore liquidity during the holiday period, also contributed to the push.

Wang Qing, Chief Macro Analyst at Orient Securities, pointed out that, “The weakness of the US dollar combined with seasonal foreign exchange needs of exporters has driven the RMB to strengthen. Continued appreciation will enhance China’s capital market attractiveness to international investors.”

What Do Institutions Say About the RMB’s Outlook in 2026?

Although the RMB against the USD has reached a historic high, most institutions believe that the appreciation potential has not been fully realized. From the trade-weighted index and domestic deflation pressures, the RMB’s relative economic fundamentals are still undervalued.

Senior strategist Xing Zhaopeng at ANZ Bank predicts that in the first half of 2026, USD/CNY may fluctuate within the range of 6.95-7.00. Goldman Sachs has a more optimistic view, believing that the RMB is undervalued by about 25%, and expects USD/CNY to fall to 6.90 by mid-2026, further dropping to 6.85 by the end of the year.

From a trade perspective, Bank of America analyzes that improved China-US relations have boosted exporters’ confidence, and the scale of USD selling by Chinese exporters will continue to expand in 2026. Therefore, it is expected that USD/CNY will fall to 6.80 by the end of 2026, which is the most aggressive forecast in the market.

Overall, many international institutions maintain a consensus that the RMB will appreciate against the USD in 2026. Although there are differences in the predicted magnitude, the direction of appreciation is basically certain.