RMB appreciation cycle begins? USD to RMB 2026 trend forecast

The Renminbi is Brewing New Appreciation Opportunities

Since 2025, the volatility path of the USD against the Renminbi has attracted significant market attention. This year, the Renminbi ended a three-year depreciation trend, showing clear signs of reversal. Data indicates that the USD/RMB fluctuated within the 7.04 to 7.3 range, with an annual appreciation of over 3%; the offshore market oscillated between 7.02 and 7.4.

Entering December, the Renminbi’s upward momentum has accelerated noticeably. As the Federal Reserve initiates a rate cut cycle, the RMB against the USD has strongly broken through 7.05, reaching a recent high of 7.0404, the highest in nearly 14 months. Industry insiders generally believe this marks the potential start of a new medium- to long-term appreciation trajectory for the Renminbi.

Three Major Factors Driving USD/RMB Trends

US Dollar Index: From Strength to Correction

In the first half of 2025, the USD Index fell from 109 at the start of the year to around 98, a decline of nearly 10%, marking the weakest first half since the 1970s. However, in November, expectations of Fed rate cuts cooled, combined with better-than-expected US economic data, causing the USD Index to rebound above 100. Yet, in December, with the Fed’s rate cut policy implemented and a possible tilt towards dovishness, the USD Index again retreated to the 97.8-98.5 range.

A moderate strengthening of the dollar may exert pressure on the Renminbi, but the positive effects of US-China agreements have temporarily offset short-term shocks. This seesaw pattern provides a relatively balanced development space for USD/RMB.

US-China Trade Relations: From Confrontation to Easing

Recent negotiations in Kuala Lumpur have signaled positive developments: the US will reduce tariffs on Chinese goods involving fentanyl from 20% to 10%, and will suspend the 24% ad valorem tariff component until November 2026. Both sides also agreed to delay implementing export controls on rare earths and port fee measures, while expanding US agricultural product purchases.

Nevertheless, US-China trade relations still contain uncertainties. Given the quick breakdown of the Geneva agreement in May, the market remains cautious about whether a ceasefire can be maintained long-term. If relations stabilize, the environment for the Renminbi is expected to remain steady; if frictions escalate, the Renminbi will face renewed pressure.

Central Bank Policy Orientation: The “Anchor” of the RMB Central Parity

The RMB against the USD central parity plays a key role in stabilizing expectations. The People’s Bank of China tends toward easing monetary policy to support economic recovery, especially amid a sluggish real estate sector. However, there needs to be a dynamic balance between monetary policy and exchange rate stability. If easing policies are combined with stronger fiscal stimulus to stabilize the economy, the Renminbi will be supported in the long term; otherwise, it may face depreciation pressures.

International Investment Banks Signal Optimism

Several top investment banks have recently issued reports with a consensus positive outlook on the Renminbi.

Deutsche Bank believes that the recent strength of the Renminbi may signal the start of a long-term appreciation cycle. The bank forecasts USD/RMB will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Goldman Sachs offers an even more optimistic view. Its global FX strategy head states that the Renminbi’s real effective exchange rate is undervalued by 12% compared to the ten-year average, with a 15% undervaluation against the dollar. Based on this, Goldman Sachs estimates that USD/RMB will appreciate to 7.0 over the next 12 months. The bank believes that strong Chinese exports will support the Renminbi, while the Chinese government prefers to use other policy tools to boost the economy rather than relying on currency depreciation strategies.

How Investors Should Respond

For investors seeking to capitalize on USD/RMB trading opportunities, timing is crucial.

In the short term, the Renminbi is expected to remain relatively strong, but generally fluctuate inversely with the dollar within a limited range. The likelihood of a rapid appreciation below 7.0 before the end of 2025 is low.

Subsequently, close attention should be paid to three key variables: the actual trajectory of the USD Index, signals from the RMB central parity adjustments, and the implementation pace and strength of China’s stabilizing growth policies. The evolution of these three factors will determine the medium-term trend of USD/RMB.

Four Perspectives for Judging the RMB Exchange Rate

Most Direct: Monetary Policy Signals

The People’s Bank of China’s monetary policy stance directly influences money supply. Rate cuts or reserve requirement reductions increase expected supply, naturally weakening the RMB; rate hikes or reserve ratio increases tighten liquidity, supporting the RMB’s strength. Historically, when the PBOC launched an easing cycle in 2014, lowering loan rates six times and significantly reducing reserve requirements, USD/RMB rose from 6 to over 7.4, illustrating the long-term impact of policy.

Economic Data: Determining Foreign Capital Flows

When China’s economy performs strongly, foreign capital inflows increase, boosting demand for the RMB and supporting its appreciation; conversely, economic slowdown leads to the opposite. Investors should closely monitor quarterly GDP data, official and Caixin PMI monthly data, CPI inflation indicators, and urban fixed asset investment and other key economic indicators.

USD Trend: A Direct Benchmark

The policies of the Federal Reserve and the European Central Bank are core drivers of the USD trend. In 2017, as the Eurozone’s economy recovered strongly, the ECB signaled tightening, and the USD Index fell below 100, USD/RMB declined by 15%, demonstrating a high correlation between the two.

Official Guidance Mechanisms: Not to Be Overlooked

The RMB central parity quotation mechanism includes a “counter-cyclical factor,” which is an active guidance tool by the PBOC. Although it has short-term influence, the medium- to long-term trend is ultimately determined by market fundamentals.

Review of Exchange Rate Trends Over the Past Five Years

2020: Started the year in the 6.9-7.0 range, depreciated to 7.18 in May amid trade tensions and pandemic shocks, then rebounded strongly to 6.50 by year-end due to effective pandemic control, early economic recovery, and Fed rate cuts to near zero, appreciating about 6% for the year.

2021: China’s exports remained strong, the central bank maintained prudent policies, and the USD index stayed low. USD/RMB fluctuated narrowly between 6.35 and 6.58, with an average around 6.45.

2022: The Fed’s aggressive rate hikes pushed the USD index higher, China’s pandemic policies hampered the economy, and a real estate crisis worsened. USD/RMB rose from 6.35 to over 7.25, depreciating about 8%, the largest decline in recent years.

2023: The Fed maintained high rates, USD index ranged from 100 to 104, China’s economic recovery fell short of expectations, and USD/RMB fluctuated between 6.83 and 7.35, ending the year at 7.1.

2024: The USD weakened, China’s fiscal stimulus boosted confidence, and volatility increased throughout the year, reaching 7.3 at mid-year.

Offshore Renminbi: A Barometer of Market Sentiment

Offshore RMB (CNH) reflects global market sentiment due to more flexible trading and unrestricted capital flows, often exhibiting larger fluctuations than onshore RMB (CNY).

In 2025, despite multiple fluctuations, CNH overall trended upward within a range. Early in the year, US tariffs and the surge in the USD Index to 109.85 caused CNH to dip below 7.36. The PBOC issued 60 billion offshore bills to absorb liquidity and stabilize the central parity.

Recently, with easing US-China dialogue, policy measures to stabilize growth, and rising expectations of rate cuts, CNH has strengthened significantly. On December 15, CNH/USD broke through 7.05, rebounding over 4% from the early-year high, reaching a 13-month high.

Key Conclusions

As China enters a period of easing monetary policy, USD/RMB is showing clear cyclical trends. Based on historical experience, such policy-driven cycles can last up to ten years, with short- to medium-term fluctuations driven by USD movements and unexpected events. By understanding the evolution logic of the four major factors above, investors can greatly improve their profitability in forex trading. The FX market is primarily influenced by macro factors, with transparent data releases from various countries, large trading volumes, and two-way trading, making it relatively fair and advantageous for individual investors.