USD to RMB exchange rate outlook for 2026 | Has the RMB appreciation cycle begun?

The Renminbi is entering a new appreciation phase, with the USD-RMB exchange rate facing an important turning point

Since 2025, the RMB has shown clear signs of reversal. The USD to RMB exchange rate has fluctuated bidirectionally within the 7.04 to 7.3 range, appreciating by about 3% so far this year; the offshore market has fluctuated between 7.02 and 7.4. The most notable event was on December 15, when the RMB strengthened past the 7.05 threshold, continuing to rise to 7.0404, hitting a nearly 14-month high.

This shift breaks the pattern of RMB depreciation against the dollar for three consecutive years from 2022 to 2024. To understand the logic behind this round of appreciation, it is necessary to examine the long-term trend of USD-RMB from multiple perspectives.

Core factors influencing the USD-RMB exchange rate analysis

The movement of the US Dollar Index is the main driver

In the first half of the year, the US Dollar Index fell from 109 at the start of the year to about 98, a decline of nearly 10%, marking the weakest first half since the 1970s. By December, with the Federal Reserve cutting interest rates and expectations of a dovish future policy warming up, the dollar index declined for several days, bottoming at 97.869, then falling back into the 97.8-98.5 range.

A moderate strengthening of the dollar usually puts pressure on the RMB, but the current relatively weak dollar index environment is more favorable for the RMB. The USD-RMB exchange rate has an inverse relationship with the USD Index, which is a key reference for judging future trends.

The improvement in China-US trade relations provides substantial support

The latest round of China-US economic and trade consultations reached a ceasefire consensus in Kuala Lumpur— the US will reduce tariffs on Chinese goods related to fentanyl from 20% to 10%, and suspend the 24% retaliatory tariffs until November 2026. Both sides also agreed to temporarily halt export controls on rare earths and port fee measures, and expand purchases of US soybeans and other agricultural products.

However, the durability of this agreement is uncertain, as a similar deal reached in Geneva in May this year quickly fell apart. The future development of China-US trade relations is the most important external factor in judging the USD-RMB exchange rate trend. If the current situation persists, the RMB environment is expected to remain stable; if tensions escalate, markets will face renewed pressure.

The Federal Reserve’s monetary policy has a profound impact on USD-RMB

The Fed’s interest rate decisions directly influence the strength of the dollar. The magnitude and pace of rate cuts in 2025 depend on inflation data, employment performance, and policies of the Trump administration. The RMB and USD Index usually move in opposite directions—if the Fed maintains high interest rates, a strong dollar will suppress the RMB; if economic slowdown prompts faster rate cuts, a weaker dollar will benefit the RMB.

The dual role of PBOC policies and economic data

The People’s Bank of China tends to adopt easing policies to support economic recovery, especially amid a sluggish real estate sector. Rate cuts or reserve requirement ratio reductions can exert downward pressure on the RMB, but if easing policies are combined with strong fiscal stimulus to stabilize the economy, the RMB will be supported in the long term.

Resilient export growth, the reallocation of foreign capital into RMB assets, and the increasing internationalization of the RMB will all support the RMB exchange rate over the medium to long term.

International investment banks’ forecasts for USD-RMB outlook

The market generally believes that the RMB depreciation cycle starting in 2022 has ended, and the RMB is expected to enter a new phase of medium- to long-term appreciation.

Deutsche Bank pointed out that recent RMB strength against the dollar signals the start of a long-term appreciation cycle. The bank forecasts RMB to appreciate to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Goldman Sachs, through its global FX strategist Kamakshya Trivedi, has attracted market attention. Goldman Sachs significantly raised its USD-RMB forecast from 7.35 to 7.0 for the next 12 months, predicting that the “break below 7” could happen sooner than market expectations. The logic is that the RMB’s real effective exchange rate is undervalued by 12% relative to its 10-year average, and by 15% relative to the USD. Based on progress in US-China negotiations and the current undervaluation, the RMB is expected to appreciate to 7.0 within 12 months. Goldman Sachs also states that strong Chinese exports will support the RMB, and that the Chinese government prefers to use other policy tools to boost the economy rather than pursue currency depreciation strategies.

Timing considerations for buying RMB-related currencies now

Investing in RMB-related currencies indeed offers profit opportunities, but timing is crucial.

In the short term, the RMB is expected to remain relatively strong, with fluctuations inversely correlated with the dollar and limited in amplitude. The likelihood of rapid appreciation below 7.0 before the end of 2025 is low. Going forward, close attention should be paid to three key variables: the USD index trend, signals from the RMB midpoint rate, and the strength and pace of China’s stabilizing growth policies.

How should investors independently assess the USD-RMB trend?

The first factor: People’s Bank of China monetary policy

Monetary policy stance directly affects money supply, thereby influencing the exchange rate. Easing policies (rate cuts, reserve requirement ratio reductions) increase RMB supply expectations, leading to a weaker currency; tightening policies (interest rate hikes, reserve ratio increases) tighten liquidity and support a stronger RMB.

In November 2014, the PBOC launched a easing cycle, lowering loan rates six consecutive times and continuously reducing reserve requirements, bringing the reserve ratio for small and medium-sized banks from 18% down to below 8%. During this period, USD-RMB rose from 6 to a peak above 7.4, fully reflecting the profound impact of monetary policy.

The second factor: China’s economic performance

When the economy grows steadily or outperforms other emerging markets, it attracts sustained foreign capital inflows, increasing demand for the RMB and supporting its strength. Conversely, economic slowdown or reduced attractiveness will slow foreign inflows and put downward pressure on the RMB.

Key economic data to monitor include:

• Gross Domestic Product (GDP): released quarterly, reflecting macroeconomic conditions
• Purchasing Managers’ Index (PMI): released monthly, with official surveys focusing on large and medium enterprises, and Caixin surveys on small enterprises
• Consumer Price Index (CPI): released monthly, measuring inflation and indirectly reflecting economic activity
• Urban Fixed Asset Investment: released monthly by the National Bureau of Statistics, indicating fixed asset activity

The third factor: USD trend and Federal Reserve policies

The monetary policies of the Fed and the European Central Bank are often key to USD movements. For example, in early 2017, the Eurozone experienced its strongest recovery since the debt crisis, with GDP growth surpassing the US, and the ECB signaling tightening, which boosted the euro. After breaching 100, the USD index showed fatigue and fell 15% over the year. During the same period, USD-RMB also declined, demonstrating a high correlation.

The fourth factor: Official signals guiding USD-RMB exchange rate

Since 1978, the RMB has undergone multiple exchange rate management reforms. The last comprehensive reform in May 2017 adjusted the midpoint pricing model from “closing price + a basket of currencies” to “closing price + a basket of currencies + countercyclical factor,” easing market behavior aligned with the cycle.

Recent observations show that this approach and pricing mechanism have a significant short-term impact on the exchange rate, but the medium- to long-term trend still depends on the overall direction of the currency market.

A five-year review of USD-RMB and pattern exploration

2020: Pandemic accelerates RMB appreciation

At the start of 2020, USD-RMB fluctuated between 6.9 and 7.0. Due to US-China trade tensions and the pandemic, RMB depreciated to 7.18 in May. As China quickly controlled the pandemic and led economic recovery, and the Fed cut rates to near zero, China maintained prudent policies, and the widening interest rate differential drove RMB strongly back to around 6.50 by year-end, appreciating about 6% for the year.

2021: Strong exports support RMB

China’s sustained strong exports and economic improvement, along with the PBOC maintaining prudent policies, 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: US rate hikes cause significant RMB depreciation

Aggressive Fed rate hikes and soaring USD index pushed USD-RMB from 6.35 to above 7.25, depreciating about 8% for the year, the largest decline in recent years. Meanwhile, strict pandemic policies in China hampered the economy, real estate crises worsened, and market confidence declined.

2023: Economic recovery fell short, constraining RMB

USD-RMB fluctuated between 6.83 and 7.35, with an average around 7.0, ending slightly higher at 7.1. China’s post-pandemic recovery was weaker than expected, with ongoing real estate debt crises, high US interest rates, and USD index between 100 and 104, putting pressure on the RMB.

2024: Policy stimulus supports RMB

Weakening USD eased pressure on the RMB, with fiscal stimulus and real estate support measures boosting market confidence. USD-RMB rose from 7.1 to around 7.3 by mid-year, with offshore RMB breaking below 7.10 in August to reach a six-month high, and volatility increasing throughout the year.

Divergence between offshore and onshore RMB

Since CNH is traded in international markets like Hong Kong and Singapore, with more freedom and unrestricted capital flows, it reflects global market sentiment more directly. CNY, under capital controls and guided by the PBOC through the midpoint rate and forex interventions, tends to be less volatile, so CNH experiences slightly larger fluctuations.

In 2025, offshore RMB (CNH) against USD generally shows a volatile upward trend. Early in the year, impacted by US tariff policies and a spike in the USD index to 109.85, CNH briefly broke above 7.36, prompting the PBOC to take measures to stabilize the market, including issuing 60 billion yuan of offshore bills to absorb liquidity and controlling the midpoint rate.

Recently, with easing US-China trade tensions, China’s steady growth policies, and rising expectations of Fed rate cuts, CNH has strengthened significantly. On December 15, CNH/USD broke through 7.05, rebounding more than 4% from the year’s high, hitting a nearly 13-month high.

Conclusion: Grasp long-term patterns and respond rationally to short-term fluctuations

As China enters a sustained easing cycle of monetary policy, the USD-RMB exchange rate is showing a clearer medium-term trend. Based on historical cycles driven by policy, which can last up to ten years, short-term fluctuations are often influenced by USD movements and other events. Investors can greatly improve profitability by understanding and monitoring the factors affecting RMB trends.

The foreign exchange market is primarily macro-driven, with data from various countries being transparent and publicly available. Coupled with the large trading volume and two-way trading, it is a relatively fair and advantageous investment domain for individual investors.