USD to RMB exchange rate drops below 7! Do institutions predict it will fall further by 2026?

Recently, the RMB to USD exchange rate has been making headlines—on December 25th, offshore RMB reached its strongest performance since September 2024, with USD/CNH falling to 6.9965. Meanwhile, onshore RMB (USD/CNY) also dropped to 7.0051, the lowest since May 2023.

In simple terms, you need fewer USD to exchange for RMB. What’s behind this?

Why has the RMB been so strong recently?

This appreciation is mainly driven by three forces:

The USD itself is weakening. Influenced by the Federal Reserve’s rate cuts and the global de-dollarization trend, the US dollar index has fallen over 10% this year, and has dropped more than 2% in the past month. When the USD is weak, the RMB naturally appreciates.

The central bank is “allowing” the RMB to appreciate. Since the beginning of this year, the central bank has continuously increased the midpoint rate of the RMB exchange rate (reference rate), signaling policy support for RMB appreciation.

Year-end foreign exchange settlement rush. By 2025, China has accumulated a huge trade surplus. As the year-end approaches, companies are rushing to settle foreign exchange, and this seasonal effect directly pushes up the RMB.

Additionally, the central bank has not yet further cut interest rates, and with offshore liquidity tightening during the holiday season, these factors also support the RMB’s upward movement.

Wang Qing, Chief Macro Analyst at Orient Securities, stated: “The main drivers are the weak USD and seasonal foreign exchange conversions by exporters. RMB appreciation can also enhance the attractiveness of our capital markets to foreign investors.”

But is this really just the beginning? Look at the 2026 forecast

Interestingly, although the RMB has already strengthened significantly, many institutions believe it is still undervalued.

Goldman Sachs’s prediction is the most aggressive: They believe the RMB is undervalued by about 25% relative to economic fundamentals. They expect USD/CNY to fall to 6.90 by mid-2026, and further down to 6.85 by the end of the year.

ANZ Bank is relatively conservative: Senior strategist Xing Zhaopeng believes that in the first half of 2026, USD/CNY may fluctuate within the range of 6.95-7.00.

The logic of U.S. banks is export-driven: They believe that easing US-China relations will improve export prospects, leading to increased selling pressure on USD to buy RMB. They forecast that by the end of 2026, USD/CNY could fall to 6.80.

What does this mean?

From a trade-weighted and deflation perspective, the market consensus is that the RMB still has room to appreciate. If these institutional forecasts prove correct, next year your USD holdings will be worth more (relative to RMB), but it also means you will need more RMB to exchange for USD.

For investors holding RMB assets, this isn’t necessarily a bad thing—appreciating currencies often indicate strong economic fundamentals, and the attractiveness of capital markets may also increase.