The USD to CNY exchange rate hits a new low. Will it rise again in 2026?

The wave of RMB appreciation has arrived. On December 25th, the USD to offshore RMB (USD/CNH) fell to 6.9965, the lowest since September 2024. The onshore RMB (USD/CNY) even dropped to 7.0051, refreshing the record since May 2023. What does this mean? In simple terms, the USD to RMB exchange rate is weakening, and the RMB is strengthening.

**What is driving this wave of RMB appreciation?**

Observing the market, at least three forces are at play. First, the US dollar itself is weakening. The Federal Reserve's rate cut cycle and the global de-dollarization trend are working together, with the dollar index declining over 10% this year, and dropping more than 2% in the past month. A weak dollar naturally favors RMB appreciation.

Second, the People's Bank of China (PBOC) is actively guiding the RMB to appreciate. Since early 2024, the central bank has continuously raised the midpoint of the RMB exchange rate, and this upward adjustment of the reference rate has directly boosted expectations of RMB appreciation.

The third factor is the year-end foreign exchange settlement surge. In 2025, China’s trade surplus was huge. As the year-end approaches, export companies are converting their foreign exchange earnings into RMB to secure profits, creating a seasonal force pushing the RMB higher. Additionally, the PBOC has delayed further interest rate cuts, and the tightening liquidity in offshore markets due to the holiday season has also contributed to the RMB's rise.

Wang Qing, Chief Macro Analyst at Orient Securities, commented: "The weakening dollar and the seasonal foreign exchange settlement boom together have driven the RMB to strengthen. This appreciation trend will help enhance China's capital market attractiveness to international investors."

**From an undervaluation perspective, the RMB still has room to grow**

Interestingly, although the RMB has been appreciating, many professionals believe that, based on the trade-weighted index and China's actual deflation situation, the RMB is still undervalued.

ANZ Bank's senior strategist Xing Zhaopeng predicts that in the first half of 2026, the USD to RMB may fluctuate within the range of 6.95-7.00. Goldman Sachs holds a more aggressive view, believing that the USD to RMB is undervalued by about 25% relative to China's economic fundamentals, and expects the mid-2026 USD to RMB to fall to 6.90, possibly dropping further to 6.85 by the end of the year.

Bank of America also joins the forecast camp. They point out that easing US-China relations have improved Chinese exporters' outlook, and expect the scale of dollar sales by Chinese companies to further increase in 2026. Based on this, Bank of America predicts that by the end of 2026, the USD to RMB exchange rate could fall to around 6.80.

From these forecasts, the story of RMB appreciation may continue into 2026.