The US dollar hits a new high against the RMB! How long can the appreciation window last in 2026?

The RMB’s appreciation wave against the US dollar continues. By the end of December, the USD to RMB exchange rate has broken below the 7.0 mark, with offshore prices touching 6.9965 and onshore prices approaching 7.0051. This is the strongest RMB performance since 2023. What are the driving forces behind this?

Multiple Factors Resonating to Push Up the RMB

The RMB’s strength is not due to a single factor but results from the convergence of several forces.

First is the US dollar’s own weakness. The Federal Reserve’s interest rate cut cycle has led to a cumulative decline of over 10% in the dollar index this year, with a drop of more than 2% in the past month alone. Against the backdrop of global de-dollarization, the dollar’s attractiveness has significantly diminished, creating external conditions favorable for RMB appreciation.

Second is the change in central bank stance. The People’s Bank of China (PBOC) has signaled a clear policy direction by continuously raising the midpoint of the USD to RMB exchange rate, allowing the RMB to appreciate steadily. This guiding operation has set the tone for the market.

Year-end factors also play a role. China maintained a large trade surplus in 2025, and as the year-end approaches, corporate demand for foreign exchange settlement releases, further accelerating RMB appreciation. Additionally, the central bank has not yet further cut interest rates, and liquidity tightens during the holiday season, all contributing to higher RMB prices.

Can Fundamentals Support the Appreciation Trend?

Although the USD to RMB exchange rate has hit new lows, most analysts believe that, based on economic fundamentals, the RMB is still significantly undervalued.

Goldman Sachs’s view is more aggressive, estimating that the RMB is undervalued by about 25% relative to its fundamentals. They forecast that by mid-2026, USD to RMB could fall to 6.90, with further depreciation to 6.85 by the end of the year.

ANZ strategists offer a more moderate forecast: in the first half of 2026, USD to RMB is expected to stay within the 6.95-7.00 range, indicating confidence in exchange rate stability.

From an exporter’s perspective, Bank of America analyzes that as China-US relations ease, domestic exporters’ dollar-selling pressure will increase, potentially pushing USD to RMB to reach 6.80 by the end of 2026.

Multi-Dimensional Effects of the Appreciation

The RMB’s appreciation is not just a numerical change but also influences market participants’ decisions. Industry analysts point out that a sustained appreciation will significantly enhance China’s capital market attractiveness to overseas investors, helping to attract more incremental foreign capital.

For import and export companies, RMB appreciation means that RMB-denominated export goods will become more price competitive, but it also raises import costs. This yin-yang effect will reshape the cost structure of supply chains.

Can the Appreciation Continue in 2026?

According to forecasts from multiple institutions, the RMB’s upward momentum in 2026 still has room to continue, but the pace may slow down. This depends on several key variables: whether the dollar continues to weaken, the degree of US-China economic policy coordination, and how the global liquidity environment evolves.

Currently, the window for USD to RMB appreciation has not fully closed, but the 6.80-6.90 range may become a relative high point. Investors should closely monitor central bank operations, trade data, and international policy developments to grasp the rhythm of exchange rate fluctuations.