What is the outlook for mainland currency values before 2026? The RMB is appreciating, seize the exchange rate trading opportunities.

Renminbi Enters a New Appreciation Cycle, Reaching a 14-Month High by Year-End

The 2025 Renminbi exchange rate trend has shown a clear turnaround. Driven by the Federal Reserve’s rate cuts at the end of the year, the USD/RMB exchange rate broke through the 7.05 level by year-end, then continued to rise to 7.0404, hitting a new 14-month high. This shift is highly significant—the three-year consecutive depreciation against the US dollar since 2022 has officially ended.

Looking back at the year’s performance, the RMB fluctuated within a range against the USD, with onshore markets oscillating between 7.04 and 7.3, appreciating about 3% over the year; offshore markets experienced greater volatility, moving between 7.02 and 7.4. Behind this resilience, subtle changes in China’s currency fundamentals are reflected—external trade conditions easing, internal economic expectations adjusting—together promoting a rebound in the RMB.

Three Major Factors Supporting the RMB’s Strength

Several international investment banks are optimistic about the RMB outlook, with core logic pointing to three main drivers:

China’s Export Resilience Continues — Despite global trade uncertainties, Chinese goods remain competitive internationally, increasing foreign investment demand for RMB assets.

Structural Weakening of the US Dollar Index — In the first half of 2025, the USD index fell from 109 to 98, a nearly 10% decline, the weakest performance since the 1970s. Although it rebounded in November due to stronger-than-expected US economic data, after the Fed’s rate cut in December, it retreated again to the 97.8-98.5 range, making short-term breakthroughs unlikely.

Stabilization of US-China Trade Relations — In recent negotiations in Kuala Lumpur, the US reduced tariffs on fentanyl from 20% to 10%, and suspended the 24% ad valorem tariff until November 2026. Although the sustainability of the agreement remains uncertain, signs of easing have boosted market confidence and eased RMB depreciation pressures.

Investment Banks Forecast RMB Will Enter an Appreciation Trajectory

Deutsche Bank believes the RMB has entered a long-term appreciation cycle, estimating that the USD/RMB will fall to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Goldman Sachs is more aggressive, with the global FX strategy head stating that the RMB’s real effective exchange rate is undervalued by 12% relative to its ten-year average, and 15% undervalued against the dollar. Based on this mispricing, Goldman Sachs has significantly raised its 12-month RMB forecast to 7.0, suggesting the “breaking 7” level could occur sooner than market expectations. They also emphasize that the Chinese government prefers fiscal rather than currency depreciation to stimulate the economy, providing long-term support for the RMB.

Four Key Factors Influencing RMB Trends

US Dollar Policy Direction — The Federal Reserve’s pace of rate cuts will directly determine the dollar’s strength. If inflation remains high, the Fed may slow rate cuts, supporting the dollar; if the economy slows significantly, faster cuts will weaken it. The RMB and the USD index usually move inversely.

China’s Monetary Policy Orientation — The People’s Bank of China tends toward easing policies to support economic recovery. In the short term, rate cuts or reserve requirement reductions may exert downward pressure on the RMB; however, if combined with strong fiscal stimulus stabilizing the economy, long-term RMB appreciation is likely.

China’s Economic Data Performance — Indicators like GDP, PMI, CPI, and fixed asset investment directly influence foreign capital inflows. Improving economic data attracts sustained foreign investment in RMB assets, supporting the currency; poor data reduces demand.

PBOC’s Exchange Rate Guidance — Since introducing the “counter-cyclical factor” in 2017, the official guidance on the exchange rate has become more prominent. The midpoint rate signals have a significant short-term impact on the exchange rate.

Is Now a Good Time to Invest in RMB-Related Currency Pairs?

The answer is yes, but timing is crucial. In the short term, the RMB is expected to remain relatively strong, with limited fluctuations and inverse correlation with the USD. The rapid appreciation below 7.0 before the end of 2025 is less likely. Investors should focus on three key variables: USD index trend, RMB midpoint adjustment signals, and China’s stabilizing growth policies and their pace.

Five-Year Historical Review: Cyclical Evolution of the RMB

2020 — Fluctuated between 6.9 and 7.0 at the start of the year, but due to the pandemic, depreciated to 7.18 in May. Subsequently, China controlled the pandemic early, recovered, and with the Fed lowering rates to near zero, the RMB rebounded strongly to 6.50 by year-end, appreciating about 6% for the year.

2021 — Continued strong exports, the central bank maintained prudent policies, and with a weak USD index, the RMB traded narrowly between 6.35 and 6.58, averaging around 6.45, remaining relatively strong.

2022 — The Fed’s aggressive rate hikes pushed the USD index higher, causing the RMB to depreciate sharply from 6.35 to over 7.25, a decline of about 8%, the largest in recent years. Meanwhile, strict pandemic controls and a housing crisis weighed on the economy and market confidence.

2023 — The RMB fluctuated between 6.83 and 7.35, ending the year at 7.1. Economic recovery was weaker than expected, with ongoing real estate difficulties, and high US interest rates supported the dollar, putting pressure on the RMB.

2024 — The weakening dollar eased pressure, and China’s fiscal stimulus boosted confidence, pushing the RMB to around 7.3 mid-year, with offshore RMB breaking below 7.10 in August, reaching a six-month high.

Offshore RMB Performance Is More Sensitive and Volatile

Because CNH is traded freely in markets like Hong Kong and Singapore, with unrestricted capital flows, it reflects global market sentiment more directly. As a result, its volatility exceeds that of the onshore CNY, which is subject to capital controls. Despite multiple fluctuations in 2025, the offshore RMB has generally trended upward. Early in the year, US tariffs and the USD index soaring to 109.85 caused CNH to dip below 7.36. The People’s Bank of China responded by issuing 60 billion yuan in offshore bills to drain liquidity and stabilized the midpoint. Recently, with easing US-China dialogue, growth stabilization policies, and market expectations of Fed rate cuts, CNH has strengthened significantly, breaking through 7.05 on December 15, up over 4% from the start of the year, reaching a 13-month high.

Key Investment Approach: How to Judge the RMB Trend

When investing in RMB-related currency pairs, analyze systematically across four dimensions:

Central Bank Monetary Policy — Easing (rate cuts, reserve requirement reductions) increases money supply and exerts downward pressure on the RMB; tightening supports appreciation.

Economic Data Health — Strong GDP growth, PMI, CPI, etc., attract foreign capital inflows, boosting the RMB; weak data reduces demand.

US and Fed Movements — Fed monetary policy, US economic data, and USD index trends directly influence RMB appreciation or depreciation space.

Official Exchange Rate Guidance — The PBOC influences short-term rates through the midpoint rate and counter-cyclical adjustments.

Understanding the interaction of these factors is crucial for grasping the medium- and long-term RMB trend. Regardless of market developments, the core remains the same: by mastering the drivers of the RMB’s movement, investors can significantly improve profit prospects. The forex market’s large trading volume, two-way trading, and transparent data provide a relatively fair environment for individual investors.