Renminbi Trend Forecast 2026 | Has the Appreciation Cycle Started? Analysis of the Buying Opportunity Before the End of the Year

The Renminbi Faces a Reversal Opportunity: What Is the Current Trend of the USD/RMB Exchange Rate?

Since 2025, the RMB exchange rate has experienced a dramatic turnaround. After three consecutive years of depreciation from 2022 to 2024, this year the RMB finally reversed its downward trend, showing impressive recovery momentum. The USD/RMB exchange rate fluctuated within the 7.04 to 7.3 range, appreciating by about 3% overall. Meanwhile, offshore RMB (CNH) oscillated between 7.02 and 7.4, with greater volatility, reflecting ongoing international market concern about the RMB’s outlook.

Most notably, after December, the RMB’s performance has strengthened significantly. The Federal Reserve’s interest rate cut cycle, increased market risk appetite, and other positive factors have combined to push the USD/RMB exchange rate decisively past the psychological threshold of 7.05. It has currently reached 7.0404, hitting a 14-month high. What does this trend signify? Industry experts generally believe that the depreciation cycle that began in 2022 is ending, and a new appreciation trajectory may have already begun.

Reviewing the full trajectory from the start of the year, the RMB faced dual pressures in the first half: rising global tariffs uncertainty and a strengthening US dollar index. Offshore RMB once broke through 7.40, reaching its lowest level since the “8.11” exchange rate reform in 2015. Market concerns about RMB weakness peaked during this period.

The turning point appeared in the second half. As China-US trade negotiations continued to advance and relations eased, coupled with the US dollar index turning downward, the RMB began to stabilize gradually. Against the backdrop of rising major non-US currencies like the euro and pound sterling, the RMB embarked on a moderate yet firm appreciation trend, stabilizing market sentiment.

Four Core Factors Determining the RMB Outlook

US Dollar Index: Short-term rebound unlikely to alter medium-term weakness

In the first half of 2025, the US dollar index fell from 109 at the start of the year to around 98, a decline of nearly 10%, marking the weakest half-year performance since the 1970s. After November, optimism about the Fed’s rate cuts cooled, and with strong US economic data, the dollar index rebounded and repeatedly crossed the 100 mark.

However, the sustainability of this rebound is questionable. A mild strengthening of the dollar usually exerts downward pressure on the RMB, but the stabilizing effect of the China-US trade agreement is offsetting this short-term impact. In December, with the Fed’s rate cut decision implemented and dovish signals emerging, the dollar index turned downward again, even briefly touching 97.869, returning to a volatile range of 97.8-98.5.

China-US Trade Negotiations: Can a ceasefire be sustained long-term?

The latest round of China-US trade talks concluded in Kuala Lumpur, with both sides reaching a consensus on a trade ceasefire. Specifically, the US will reduce tariffs on Chinese fentanyl-related products from 20% to 10%, and suspend the 24% retaliatory tariffs until November 2026. Both countries also agreed to delay export controls on rare earths and port fee measures, and expand US agricultural product purchases.

These developments undoubtedly support the RMB positively. But history offers lessons: the Geneva agreement signed in May this year quickly fell apart, warning investors that the fragility of trade ceasefires should not be underestimated. Therefore, the subsequent evolution of China-US trade relations remains the most important external variable in judging the USD/RMB exchange rate trend. If the current situation persists, the RMB exchange environment will tend to stabilize; if frictions escalate, markets will face renewed shocks.

The Policy Game Between the Federal Reserve and the People’s Bank of China

The Fed’s moves directly influence the dollar. In the second half of 2024, the Fed began a rate cut cycle, but the pace of rate cuts in 2025 depends on inflation data, employment performance, and policies of the Trump administration. If inflation remains high, the Fed may slow or halt rate cuts, supporting the dollar; if the economy weakens significantly, accelerated rate cuts will weaken the dollar.

For the People’s Bank of China, amid sluggish real estate and insufficient domestic demand, monetary policy tends to stay accommodative to support economic recovery. Rate cuts or reserve requirement ratio reductions may cause short-term RMB depreciation pressure, but if combined with stronger fiscal stimulus to stabilize the economy, the RMB will be long-term supported. It’s important to note that the RMB and the US dollar index usually move inversely, so the relative policy gap between the two central banks will determine the medium-term exchange rate trajectory.

Rising International Status of the RMB

The RMB’s share in global trade settlement continues to increase, and China’s currency swap agreements with other countries are expanding. These long-term factors provide support for RMB stability. Although the US dollar’s status as the primary reserve currency is unlikely to change in the short term, the internationalization of the RMB is an irreversible trend, offering long- and medium-term support for the currency.

How Do International Investment Banks View the RMB Appreciation Outlook?

Market consensus is increasingly focused: the RMB exchange rate is at a cycle turning point, with the depreciation cycle ending, and the RMB may enter a new medium- to long-term appreciation phase. International investment banks have also issued quite optimistic forecasts:

Deutsche Bank’s analysis indicates that recent RMB strength signals the start of a long-term appreciation cycle. The bank expects the USD/RMB rate to rise to 7.0 by the end of 2025 and further strengthen to 6.7 by the end of 2026.

Goldman Sachs’s perspective is even more notable. In a May report, its Global FX Strategist Kamakshya Trivedi pointed out that the real effective exchange rate of the RMB is undervalued by 12% relative to its ten-year average, with an even larger undervaluation of 15% against the dollar. Based on this assessment, Goldman Sachs significantly raised its forecast for the USD/RMB rate over the next 12 months from 7.35 to 7.0, suggesting the RMB could break below 7.0 sooner than the market expects. Goldman’s logic also hinges on China’s continued strong export performance and the government’s preference for fiscal or structural tools to stimulate the economy rather than currency depreciation.

The common logic behind these forecasts is: the RMB is undervalued, with huge appreciation potential, supported by multiple fundamental factors.

Is Now the Time to Position for RMB Appreciation Before Year-End?

For investors considering currency pairs related to the RMB, the key question is timing.

In the short term, the RMB is expected to remain relatively strong, with a tendency to move inversely to the dollar within a limited range. Rapid appreciation and a breakthrough below 7.0 before year-end are less likely, so investors should not expect explosive short-term gains.

However, opportunities still exist. Close attention should be paid to three key variables:

• When will the US dollar index weaken again? — This will directly drive RMB strength.
• Signals from the RMB’s central parity rate adjustments — Guidance from the People’s Bank of China will influence market expectations.
• Implementation progress and intensity of China’s stabilizing growth policies — These will determine the fundamental support for the RMB.

Developing an Independent Judgment: An Investment Framework for RMB Trends

Instead of passively waiting for market signals, investors should learn to judge RMB trends fundamentally. Here are four core dimensions, always applicable regardless of market evolution:

1. The Cycle of China’s Monetary Policy Tightening and Easing

The People’s Bank’s stance directly impacts money supply, which in turn determines RMB’s relative scarcity. Easing policies (rate cuts, reserve requirement reductions) increase supply expectations and tend to weaken the RMB; tightening policies (rate hikes, reserve ratio increases) strengthen the RMB.

Historical example: Starting November 2014, the PBOC launched a series of rate cuts and reserve requirement reductions, lowering the reserve ratio for small and medium-sized banks from 18% to below 8%. During this period, USD/RMB rose from 6.3 to over 7.4, fully confirming that easing policies exerted downward pressure on the RMB.

2. Relative Performance of China’s Economic Data

When China maintains stable or outperforming growth compared to other emerging markets, it attracts sustained net capital inflows, increasing RMB demand and pushing the currency higher; conversely, slowing growth or declining competitiveness reduce demand, putting downward pressure on the RMB.

Key economic indicators to watch include:

• GDP growth rate — quarterly release, reflecting macroeconomic health
• PMI indices — monthly, official and Caixin versions, representing large and small enterprise activity
• CPI data — monthly, measuring inflation; high inflation may trigger policy tightening
• Fixed asset investment — monthly updates, indicating endogenous growth momentum

3. The Logic of USD Index Fluctuations

The USD’s movement directly influences USD/RMB. Differences in monetary policy between the Fed and the ECB are often key drivers of the dollar index.

Case study: Early 2017, the Eurozone’s economy rebounded strongly from the European sovereign debt crisis, with GDP growth surpassing the US. The ECB signaled policy tightening, boosting the euro. Meanwhile, the dollar index, after breaking 100, began to weaken, capital flowed into the euro, and the USD index fell 15% over the year. During the same period, USD/RMB also declined, illustrating their high correlation.

4. Policy Signals from Official Exchange Rate Management

Unlike freely floating currencies, the RMB has undergone multiple exchange rate regime reforms since 1978. The last major reform on May 26, 2017, adjusted the midpoint quotation model from “closing price + a basket of currencies” to include a “counter-cyclical factor,” strengthening the guiding role of official intervention.

The PBOC’s setting of the midpoint and foreign exchange market interventions can guide market expectations. Observing the policy orientation—whether it leans toward supporting the RMB or orderly depreciation—can often forecast market direction 2-4 weeks in advance.

Five-Year Review of RMB Trends: The Cycle Transition in Historical Perspective

2020: Initial surge and stabilization amid pandemic

At the start of 2020, USD/RMB oscillated between 6.9 and 7.0. US-China trade tensions and the pandemic initially pushed RMB to around 7.18. But as China controlled the pandemic early and led economic recovery, coupled with the Fed’s large-rate cuts to near zero and the PBOC’s steady policies, RMB rebounded strongly to around 6.50 by year-end, appreciating about 6% for the year.

2021: Export-driven RMB strength

Continued robust exports and economic growth, along with steady monetary policy, kept USD/RMB in a narrow range of 6.35-6.58, averaging about 6.45, with RMB remaining relatively strong.

2022: Rate hike cycle and depreciation

Aggressive Fed rate hikes pushed the dollar index to 109, and RMB depreciated from 6.35 to above 7.25, a decline of about 8%, the largest in recent years. Meanwhile, China’s strict pandemic policies and worsening real estate crisis eroded market confidence.

2023: Volatility under housing market resistance

USD/RMB fluctuated between 6.83 and 7.35, averaging around 7.0, ending slightly higher at 7.1. China’s post-pandemic recovery was weaker than expected, real estate debt risks persisted, and consumer momentum was insufficient. The US maintained high interest rates, with the dollar index between 100-104, keeping RMB under pressure.

2024: Policy support and dollar weakening

The dollar weakened, China’s fiscal stimulus and real estate support measures gained traction, pushing USD/RMB from 7.1 to around 7.3 mid-year. Offshore RMB briefly broke 7.10 in August, reaching a six-month high. Volatility increased significantly, indicating an approaching turning point.

In-Depth Perspective: The Market Significance of Offshore RMB (CNH)

Since CNH trades in international markets like Hong Kong and Singapore without capital controls, its volatility is often greater than onshore RMB (CNY). CNH reflects market expectations more directly, while CNY is guided by the PBOC’s midpoint and interventions.

In 2025, offshore RMB performance remains compelling. Early in the year, US tariff policies and the dollar index surged to 109.85, causing CNH to briefly fall below 7.36. The PBOC responded with stabilization measures: issuing 60 billion yuan of offshore bonds to drain liquidity, and tightening the midpoint guidance to prevent further declines.

Recently, with warming China-US dialogue, gradual implementation of China’s stabilizing growth policies, and rising Fed rate cut expectations, CNH has strengthened notably. On December 15, CNH broke through 7.05 against the dollar, rebounding over 4% from the early-year high, reaching a 13-month high. This clear trend indicates that international market confidence in RMB appreciation is rebuilding.

Overall Judgment and Outlook

As China enters a monetary easing cycle, the USD/RMB trend is showing a clear appreciation trajectory. Based on historical experience, such policy-driven cycles can last several years to a decade. In the short to medium term, the trend may be disturbed by dollar fluctuations and unexpected events, but the overall direction is established.

Investors who focus on key variables such as the dollar trend, trade environment, and central bank policies can greatly improve their forex trading success. The forex market is driven mainly by macro factors; transparent economic data from various countries serve as the best reference. Coupled with the large trading volume and two-way trading nature, it offers relatively fair opportunities for retail investors and is a long-term asset allocation direction worth following.