USD to RMB trend forecast 2026: Has the RMB appreciation cycle started?

Renminbi Is Experiencing Its Biggest Turnaround in a Decade

In 2025, the performance of the US dollar against the Renminbi has been highly volatile. Early in the year, under the dual pressures of uncertain tariff policies and US dollar appreciation, offshore Renminbi once broke through 7.40; by mid-December, driven by Federal Reserve rate cuts and improved market sentiment, the Renminbi rebounded strongly, reaching a new high in nearly 14 months and breaking through the 7.05 level.

What signals are hidden behind this reversal? According to judgments from multiple international investment banks, the Renminbi may be bidding farewell to the continuous depreciation of the past three years and entering a new cycle of appreciation.

Key Drivers of Exchange Rate Fluctuations

To predict the trend of USD against RMB, four major variables need to be monitored simultaneously:

Weak Performance of the US Dollar Index

In the first half of 2025, the US Dollar Index fell from 109 to 98, creating the weakest first half since the 1970s. After December, influenced by rising expectations of Fed rate cuts, the dollar index briefly dropped to 97.87, then retreated to the 97.8-98.5 range. Generally speaking, a weakening dollar provides an opportunity for RMB appreciation — this is currently a significant support for the RMB’s rise.

Easing US-China Trade Relations

Although uncertainties remain in China-US economic and trade negotiations, recent consensus between the two sides is noteworthy: the US will reduce tariffs related to fentanyl from 20% to 10%, and temporarily suspend some additional tariffs until November 2026. While such agreements are fragile (similar agreements in the past have quickly fallen apart), they temporarily ease market panic and give the RMB some breathing room.

Federal Reserve Policy Direction

US interest rate policies have a decisive impact on the dollar’s direction. In the second half of 2024, the Fed signaled rate cuts, with the magnitude of cuts in 2025 constrained by inflation and employment data. If inflation remains high, the Fed may slow down rate cuts, supporting the dollar; if the economy weakens, accelerated rate cuts will weaken the dollar. The RMB and USD usually move inversely.

People’s Bank of China Policy Guidance

The Chinese central bank tends to maintain an accommodative policy to support economic recovery, which can exert short-term depreciation pressure on the RMB. However, if accommodative policies are combined with strong fiscal stimulus to stabilize the economy, the RMB could be supported in the long term. Meanwhile, the official guidance of the RMB midpoint continues to serve as a “benchmark” role.

Where Are Investment Opportunities? Is Now a Good Time to Buy RMB?

Based on current conditions, the short-term trend of USD against RMB is expected to remain relatively strong, but with limited appreciation, showing a range-bound oscillation. The likelihood of quickly breaking below 7.0 before the end of 2025 is low, meaning investors seeking substantial profits need patience.

However, institutional forecasts have already hinted at the trend. Deutsche Bank estimates that RMB against USD will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026. Goldman Sachs’ global FX strategy head points out that the real effective exchange rate of RMB is undervalued by 12% compared to the ten-year average, and 15% undervalued against the USD, expecting it to rise to 7.0 within the next 12 months. Goldman Sachs’ logic is: China’s exports are strong, and the government prefers to stimulate the economy through other policy tools rather than devaluation strategies.

Three Key Variables for Investing in RMB-Related Currency Pairs:

1. The trend of the US Dollar Index (Will it remain weak or rebound?)
2. Signals from RMB midpoint rate adjustments (What is the official stance?)
3. The strength and pace of China’s steady growth policies (Can the economy stabilize?)

How to Independently Judge the Future of the Renminbi

Rather than relying solely on predictions from a single institution, it’s better to learn how to analyze independently. The following four dimensions can help investors grasp RMB movements:

Monetary Policy Tightness or Looseness

People’s Bank of China’s rate cuts or reserve requirement ratio reductions increase money supply, exerting depreciation pressure on RMB; conversely, rate hikes or reserve ratio increases tighten liquidity and support RMB appreciation. Historical data shows that when the PBOC cut rates six consecutive times and significantly lowered reserve requirements in 2014, USD/RMB rose from 6 to 7.4, illustrating the profound impact of monetary policy.

Performance of China’s Economic Data

When China’s economy grows steadily and outperforms other emerging markets, foreign capital continues to flow in, boosting demand for RMB and strengthening it. Conversely, economic slowdown triggers capital outflows and depreciation pressure. Key indicators include:

• Gross Domestic Product(GDP): Released quarterly, reflects macroeconomic conditions
• Purchasing Managers’ Index(PMI): Released monthly, official version reflects large and medium enterprises, Caixin version reflects small and medium enterprises
• Consumer Price Index(CPI): Released monthly, measures inflation; high inflation may trigger policy tightening
• Urban Fixed Asset Investment: Released monthly, reflects economic activity intensity

Strength of the US Dollar Trend

USD/ RMB movements are highly correlated with the US Dollar Index. Federal Reserve and European Central Bank policies are often decisive factors. For example, in 2017, the Eurozone’s strong economic recovery and ECB tightening signals caused the euro to rise, and the USD to fall by 15%, during which USD/RMB also declined.

Official Guidance on Exchange Rate

RMB is not a fully freely floating currency. Since 2017, the PBOC has adopted a midpoint rate quoting model based on “closing price + a basket of currencies + counter-cyclical factors,” easing market cyclicality and strengthening official guidance. In the short term, this influences the exchange rate more significantly, but in the medium to long term, the market’s overall direction prevails.

Five-Year Review: The Rise and Fall of the Renminbi

2020: Pandemic-Induced Reversal

In early 2020, around 6.9-7.0, due to US-China trade tensions and the pandemic, the RMB depreciated to 7.18 in May. Subsequently, China quickly controlled the pandemic and led the recovery, while the Fed cut rates to near zero and China maintained prudent policies, expanding interest rate differentials. This supported a strong rebound of RMB to 6.50 by year-end, appreciating about 6% for the year.

2021: Strong Export Support

China’s continuous export growth, economic improvement, and prudent monetary policy kept the USD index low. USD/RMB fluctuated narrowly between 6.35 and 6.58, with an average around 6.45, maintaining relative strength.

2022: Year of the Dollar Surge

Aggressive Fed rate hikes pushed the USD index higher, while strict COVID policies and a real estate crisis in China dragged down the economy. USD/RMB rose from 6.35 to above 7.25, depreciating about 8% for the year, the largest decline in recent years.

2023: Continued Pressure

China’s post-pandemic economic recovery was below expectations, with ongoing real estate debt crises and weak consumption; US high interest rates persisted, with USD index between 100-104. USD/RMB fluctuated between 6.83 and 7.35, ending the year at 7.1.

2024: Increased Volatility

US dollar weakened, and China’s fiscal stimulus boosted markets. From 7.1 at the start of the year, rising to 7.3 mid-year, offshore RMB broke through 7.10 in August to reach a six-month high, with overall volatility significantly increasing.

Why Is Offshore RMB(CNH) More Volatile?

Because CNH is traded in international markets like Hong Kong and Singapore, with capital flows less restricted, it better reflects global market sentiment, resulting in larger fluctuations compared to onshore RMB(CNY).

In 2025, despite multiple fluctuations, CNH showed an overall oscillating upward trend. Early in the year, US tariffs and the dollar index soaring to 109.85 caused CNH to dip below 7.36. The People’s Bank of China took measures to stabilize the market, including issuing 60 billion yuan offshore bills to recover liquidity and strictly controlling the midpoint rate.

Recently, with easing US-China dialogue, the stabilization of China’s growth policies, and rising expectations of Fed rate cuts, CNH has strengthened significantly. On December 15, it broke through 7.05, rebounding over 4% from the early-year high, reaching a 13-month high.

Summary: Grasping the RMB Appreciation Cycle

As China enters a sustained easing monetary policy cycle, the USD/RMB exchange rate is showing a clear trend. According to historical patterns, similar policy-driven cycles can last up to ten years. Although short-term performance may be affected by USD trends and unexpected events, investors who focus on the core factors influencing RMB movement can greatly improve profit prospects. The foreign exchange market is primarily macro-driven, with data transparency and large trading volumes allowing for two-way trading, making it relatively fair and full of opportunities for ordinary investors.