RMB Exchange Rate Trends and Outlook for 2026 | Has the Appreciation Cycle Started? Should You Buy Now?

Renminbi Exchange Rate Trends Are About to Reverse: What Signal Does the Near 14-Month High Send?

So far in 2025, the performance of the renminbi against the US dollar has been eye-catching. The USD/RMB exchange rate has oscillated within 7.04 to 7.3, with an appreciation of about 3% for the year, successfully reversing the depreciation trend of the past three years. Latest data shows that by mid-December, the RMB exchange rate has broken through the 7.05 level, with a low of 7.0404, hitting a near 14-month high.

What is the deeper logic behind this reversal? Starting with the difficulties in the first half of the year. At that time, global tariff policies were uncertain, the US dollar index remained strong for a long time, offshore RMB once broke below 7.40, and even hit record lows since the 2015 “8.11 FX reform.” However, in the second half, the situation changed dramatically—US-China trade negotiations made steady progress, market sentiment improved significantly, the US dollar index weakened, and the RMB exchange rate also reversed course, entering a steady upward phase.

The offshore RMB market also reflects this change. USD/Offshore RMB fluctuated between 7.02 and 7.4, slightly higher than onshore, indicating that international capital reacts more sensitively to the RMB.

Four Key Factors Determining the RMB Exchange Rate Trend

To master the prediction of RMB exchange rate movements, it is essential to monitor the following four dimensions simultaneously:

1. Changes in the strength of the US dollar index

In the first half of 2025, the 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. But since November, market expectations of Fed rate cuts cooled, coupled with better-than-expected US economic performance, the dollar index rebounded, repeatedly crossing the 100 mark. By December, with the Fed’s rate cut expectations settled, the dollar index softened again, bottoming at 97.869, returning to the 97.8-98.5 range.

Principle conclusion: A moderate strengthening of the dollar usually puts pressure on the RMB, but if US-China relations improve, this negative impact can be offset.

2. Progress of US-China trade negotiations

The latest round of Kuala Lumpur negotiations sent positive signals. The US lowered tariffs on Chinese goods related to fentanyl from 20% to 10%, and suspended the 24% ad valorem tariff increase until November 2026. Both sides also agreed to delay export controls on rare earths and port fee measures, and expand US soybean and other agricultural product purchases.

However, past lessons warn us—similar agreements reached in Geneva in May this year quickly fell apart. Therefore, the stability of US-China trade relations remains the most important external variable in judging RMB exchange rate trends. If the current situation persists, the RMB environment is expected to remain stable; if friction escalates again, the RMB will face downward pressure.

3. The Federal Reserve’s monetary policy stance

The Fed’s decisions have a profound impact on the dollar’s trend. If inflation remains high in 2025, the Fed may slow down rate cuts or maintain high interest rates, supporting a stronger dollar; conversely, if the economy slows significantly, accelerating rate cuts will weaken the dollar. RMB and the dollar index usually move inversely, so investors should closely follow Fed meeting minutes and economic data.

4. People’s Bank of China’s policy stance and China’s economic fundamentals

China’s central bank tends to maintain an accommodative monetary policy to support economic recovery, especially amid a sluggish real estate sector. Rate cuts or reserve requirement ratio reductions typically exert downward pressure on the RMB; but if easing policies are combined with fiscal stimulus that stabilizes the economy, the RMB may be supported in the long term. The internationalization of the RMB and increased currency swap agreements also provide long-term support.

RMB Exchange Rate Forecast: An Appreciation Cycle May Have Started

The market generally believes that the RMB is at a turning point. The depreciation trend starting in 2022 may have ended, and the RMB is expected to enter a new medium- to long-term appreciation trajectory.

Looking ahead to the end of 2025 and into 2026, three major supporting factors could drive the currency higher:

• Continued resilience in China’s export growth
• Gradually established trend of foreign capital reallocating into RMB assets
• Structural weakness of the US dollar index

International investment banks are generally optimistic about the RMB outlook:

Deutsche Bank believes that the recent strengthening of the RMB against the dollar may indicate the start of a long-term appreciation cycle. The bank forecasts the RMB will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Goldman Sachs shares a similarly optimistic view. In a report, global FX strategist Kamakshya Trivedi pointed out that the real effective exchange rate of the RMB is undervalued by 12% compared to its ten-year average, with a 15% undervaluation against the dollar. Based on progress in trade negotiations and the current undervaluation, Goldman Sachs expects the RMB to appreciate to 7.0 within the next 12 months. The bank also states that China’s strong export performance will support the RMB, and the Chinese government prefers to use other policy tools to boost the economy rather than relying on currency depreciation.

Is Now a Good Time to Buy RMB? Investment Recommendations at a Glance

Short-term outlook is clear; medium-term patience is needed

The RMB is expected to remain relatively strong in the short term, but the appreciation will be limited. Overall, it will fluctuate within a range inversely correlated with the dollar, with limited amplitude. The possibility of rapid appreciation below 7.0 before the end of 2025 is relatively low.

Three key indicators to monitor for timing your entry:

• Short-term trend of the US dollar index
• Signals from the RMB midpoint rate adjustments
• The strength and pace of China’s steady growth policies

If all three point toward favorable conditions for the RMB, that would be the optimal trading window.

In-Depth Analysis: How to Independently Judge the Direction of RMB Exchange Rate Trends?

Relying less on market forecasts and cultivating independent analysis skills is crucial. The following four dimensions can help you accurately grasp RMB trends:

Dimension 1: The stance of the central bank’s monetary policy

The People’s Bank of China’s monetary policy directly influences the money supply, thus affecting the exchange rate. Rate cuts or reserve requirement ratio reductions are expected to increase supply, weakening the RMB; raising interest rates or increasing reserve requirements will tighten liquidity, strengthening the RMB.

For example, in 2014-2015, the PBOC cut interest rates six times consecutively and significantly lowered reserve requirements for small and medium-sized financial institutions (from 18% to below 8%), while the USD/RMB exchange rate rose from 6 to a maximum of 7.4, illustrating the profound impact of monetary policy on the exchange rate.

Dimension 2: The contrast between China’s economic data and its strength

Stable economic growth in China will attract continuous foreign investment, increasing demand for RMB and supporting its appreciation; conversely, slowing growth will lead to reduced foreign investment or shifting elsewhere, putting downward pressure on the RMB.

Key economic indicators to watch include:

• GDP (quarterly release): reflects macroeconomic conditions
• PMI (monthly release): official PMI focuses on large enterprises; Caixin PMI covers small and medium enterprises
• CPI (monthly release): measures inflation; high inflation may trigger monetary policy adjustments
• Urban fixed asset investment (monthly release): indicates economic activity intensity

Dimension 3: The US dollar index and Fed policy trends

The dollar’s movement directly determines the USD/RMB exchange rate. The Fed and European Central Bank policies are key drivers. For example, in 2017, the European economy outperformed the US, and the ECB signaled tightening, attracting funds from the dollar to the euro, causing the dollar index to fall 15% that year. Correspondingly, USD/RMB also declined significantly, showing a high correlation.

Dimension 4: Official guidance on the exchange rate

Unlike fully market-driven currencies, the RMB has undergone multiple exchange rate management reforms since opening up. The latest adjustment on May 26, 2017, changed the RMB/USD midpoint quotation model to “closing price + a basket of currencies + counter-cyclical factor.” While this mechanism influences short-term rates, the medium- to long-term trend is still determined by market supply and demand. Monitoring official midpoint rate signals can help anticipate policy intentions.

Five-Year Review of RMB Exchange Rate

2020: A remarkable rebound amid pandemic shocks

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. But as China quickly controlled the pandemic and led economic recovery, coupled with the Fed’s near-zero rate cuts and China’s stable policies, the interest rate differential supported a strong RMB rebound. By year-end, RMB appreciated to around 6.50, a roughly 6% increase for the year.

2021: Steady rise driven by trade surplus

China’s exports remained strong, the economy improved, and the PBOC maintained prudent policies. The USD/RMB traded narrowly between 6.35 and 6.58, averaging about 6.45 for the year, maintaining relative resilience.

2022: Sharp depreciation triggered by aggressive Fed rate hikes

USD/RMB rose from 6.35 to over 7.25, with an approximately 8% depreciation, the largest in recent years. The main drivers were the Fed’s aggressive rate hikes boosting the dollar index; at the same time, China’s pandemic control policies hampered the economy, and a real estate crisis worsened market confidence.

2023: Gap between economic recovery expectations and reality

USD/RMB fluctuated between 6.83 and 7.35, averaging about 7.0, ending slightly higher at 7.1. China’s economic recovery post-pandemic was weaker than expected, with ongoing real estate debt issues and sluggish consumption; high US interest rates kept the dollar index between 100 and 104, exerting pressure on the RMB.

2024: Structural reversal driven by a weaker dollar

A weakening dollar 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, offshore RMB broke through 7.10 in August, hitting a six-month high, with increased volatility throughout the year.

Special Analysis of Offshore RMB (CNH)

CNH trades in international markets like Hong Kong and Singapore, with more自由 trading and unrestricted capital flows, thus reflecting global market sentiment more accurately. In contrast, onshore RMB (CNY) is subject to capital controls, with the People’s Bank of China guiding via the midpoint rate and forex interventions, making CNH more volatile.

In 2025, CNH’s trend also reflects market tides. Early in the year, US tariff shocks and the dollar index soared to 109.85, causing CNH to break below 7.36. The PBOC promptly took measures to stabilize the market, including issuing 60 billion yuan offshore bills to absorb liquidity and strictly controlling the midpoint rate.

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

Overall Conclusion

The RMB exchange rate is at a crucial turning point. As China’s monetary policy enters a sustained easing cycle, similar policies could lead to a long-term appreciation lasting up to ten years. While short-term fluctuations influenced by the dollar and unexpected events are inevitable, the overall direction is set.

By understanding the four main factors influencing RMB exchange rate—monetary policy, economic data, dollar index, and official guidance—you can greatly improve trading success. The forex market is driven mainly by macro factors; transparent data releases, large trading liquidity, and a two-way trading mechanism make it relatively fair and advantageous for individual investors.

For traders looking to enter, now is the best time to learn about the market and develop analytical skills. Waiting for all three key indicators to signal a favorable entry is the wisest approach.