What is the outlook for the RMB in 2026? USD to RMB exchange rate investment guide

Must-Read Before Acquiring Renminbi Assets: Current Investment Opportunity Assessment

Many investors are concerned about “whether now is the right time to buy Renminbi-related currency pairs,” and the answer depends on market timing. Currently, the Renminbi is expected to remain relatively strong in the short term, but the possibility of rapid and significant appreciation is limited. The USD/RMB exchange rate has a low probability of breaking below the 7.0 level before the end of 2025, and the market is more likely to exhibit range-bound fluctuations.

Investors should focus on three key variables: US Dollar Index trends, Renminbi midpoint rate adjustment signals, and the strength of China’s steady growth policies. These factors will directly determine trading opportunities in the coming months.

Has the Renminbi Appreciation Cycle Started? A Surprising Reversal Since 2025

Since 2025, the Renminbi has shown a clear turning point. The USD/RMB exchange rate has fluctuated bidirectionally within the 7.04 to 7.3 range, with an annual appreciation of about 3%. In the offshore market, the rate has fluctuated between 7.02 and 7.4, reflecting higher sensitivity of offshore Renminbi to international factors.

Most notably, under the influence of Federal Reserve rate cuts and market sentiment, the Renminbi surged past 7.05 on December 15, reaching a new high in nearly 14 months. This broke the three-year depreciation trend since 2022, and the market generally believes that the depreciation cycle has ended, with a new appreciation trajectory forming.

In the first half of the year, the offshore Renminbi was under pressure, breaking through the 7.40 level, and USD/RMB hit a new record since the 2015 “8.11” exchange rate reform. However, in the second half, as China-US trade negotiations steadily advanced and the US Dollar Index weakened, the Renminbi gradually stabilized and began to appreciate. Against the backdrop of the euro, British pound, and other major non-USD currencies appreciating, the Renminbi also started mildly appreciating against the US dollar.

Four Major Drivers of the USD/RMB Exchange Rate

US Dollar Index: From Strength to Correction

In the first half of 2025, the US Dollar Index fell from 109 at the start of the year to about 98, a decline of nearly 10%, marking the weakest first half since the 1970s. In the second half, expectations of Federal Reserve rate cuts temporarily increased, and in November, the USD Index rebounded above 100.

However, with the Fed’s rate cut policy implemented in December and the potential for a dovish stance in the future, the USD Index came under pressure again, bottoming out at 97.869, and falling back to the 97.8-98.5 range. It is worth noting that a moderate strengthening of the US dollar usually exerts depreciation pressure on the Renminbi, but the positive impact of the China-US agreement temporarily offset the negative short-term effects of dollar appreciation.

China-US Economic and Trade Dialogue: Coexistence of Easing and Uncertainty

In the latest round of China-US trade negotiations, both sides reached a ceasefire agreement— the US reduced tariffs on Chinese goods related to fentanyl from 20% to 10%, and suspended the 24% retaliatory tariffs until November 2026. Both countries also agreed to temporarily halt export controls on rare earths and port fee measures, and to expand purchases of US soybeans and other agricultural products.

However, long-term uncertainties still exist. A similar agreement reached in Geneva in May 2025 quickly fell apart, serving as a cautionary lesson. Therefore, the development direction of China-US trade relations remains the most important external factor in judging the USD/RMB exchange rate trend—if the status quo persists, the RMB environment is expected to remain stable; if tensions escalate, the market will come under renewed pressure.

Federal Reserve Monetary Policy: Uncertainty in Rate Cut Pace

The Fed’s policies are crucial to the USD trend. In the second half of 2024, signals of rate cuts have been issued, but the magnitude and pace of rate reductions in 2025 may be influenced by inflation data, employment performance, and policies of the Trump administration. If inflation remains persistently above target, the Fed may slow down rate cuts or maintain high interest rates to support the dollar. Conversely, if the economy slows significantly, accelerated rate cuts will weaken the dollar. Renminbi and USD index usually move inversely.

People’s Bank of China Policies and Renminbi Internationalization

China’s monetary policy tends to remain accommodative to support economic recovery. Against the backdrop of weak real estate and insufficient domestic demand, the People’s Bank of China may cut interest rates or reserve requirements to inject liquidity, exerting downward pressure on the Renminbi. However, if accommodative policies are combined with strong fiscal stimulus that stabilizes the economy, the Renminbi could be supported in the long term.

Increased use of the Renminbi in global trade settlement and expansion of currency swap agreements with other countries may support RMB stability over the long term. In the short term, however, the US dollar’s status as the primary reserve currency remains difficult to challenge.

How International Investment Banks View It: Clear Appreciation Expectations

The market generally believes that the Renminbi is at a cyclical turning point, and the depreciation cycle that began in 2022 may have ended. The Renminbi could enter a new medium- to long-term appreciation trajectory. Looking toward the end of 2025 and 2026, three main factors will drive the exchange rate higher: sustained resilience in China’s export growth, a reconfiguration trend of foreign capital into RMB assets, and the USD index maintaining a structurally weak pattern.

Deutsche Bank analysis indicates that a strengthening of the Renminbi against the dollar could signal the start of a long-term appreciation cycle, with forecasts suggesting the rate will reach 7.0 by the end of 2025 and further decline to 6.7 by the end of 2026.

Goldman Sachs, a global FX strategy leader, caused industry shock by significantly raising its USD/RMB forecast from 7.35 to 7.0 over the next 12 months, predicting that the “break below 7” could happen sooner than market expectations. Goldman’s core logic is that the real effective exchange rate of the Renminbi is undervalued by 12% compared to the ten-year average, and by 15% against the dollar. Based on negotiation progress and current undervaluation, the RMB is expected to appreciate to 7.0 within 12 months. Additionally, Goldman Sachs believes that China’s strong exports will provide support, and the Chinese government prefers to use other policy tools to boost the economy rather than pursue currency depreciation strategies.

Five-Year Historical Review: Renminbi Appreciation and Depreciation Cycles

2020: Early in the year, fluctuations ranged from 6.9 to 7.0, with tensions between China and the US and the pandemic pushing it down to 7.18. As China controlled the pandemic and led economic recovery, coupled with the Fed’s near-zero interest rates, the RMB rebounded strongly to 6.50 by year-end, appreciating about 6% for the year.

2021: China’s exports remained strong, and the central bank maintained a prudent policy. The USD index hovered low, and USD/RMB fluctuated narrowly between 6.35 and 6.58, with an average around 6.45, maintaining relative strength.

2022: The exchange rate rose from 6.35 to over 7.25, depreciating about 8% for the year. Aggressive Fed rate hikes pushed the USD index higher, while strict COVID policies and a real estate crisis dragged down the economy.

2023: The rate fluctuated between 6.83 and 7.35, ending slightly higher at 7.1. Post-pandemic economic recovery was weaker than expected, and ongoing real estate debt issues, along with high US interest rates, kept the RMB under pressure.

2024: The weakening dollar eased pressure on the RMB, and fiscal stimulus boosted confidence. The rate rose from 7.1 to 7.3 by mid-year, with offshore RMB breaking above 7.10 in August, reaching a six-month high.

Investment Framework for Judging RMB Trends

Instead of passively waiting, actively learning how to judge exchange rate movements is more effective. The following four dimensions cover the core logic influencing the RMB:

China’s Monetary Policy Orientation

The People’s Bank of China’s stance on easing or tightening directly impacts money supply and the exchange rate. Easing (rate cuts, reserve requirement reductions) increases supply expectations, leading to RMB depreciation; tightening (rate hikes, reserve ratio increases) reduces liquidity and supports RMB appreciation.

For example, in November 2014, the PBOC cut loan rates six consecutive times and significantly lowered reserve requirements for small and medium-sized banks from 18% to below 8%. During this period, USD/RMB surged toward nearly 7.4, illustrating the profound influence of monetary policy on the exchange rate.

China’s Economic Data Performance

When the economy grows steadily or outperforms other emerging markets, it attracts continuous foreign investment, increasing demand for RMB and supporting its strength; conversely, economic slowdown or reduced attractiveness leads to decreased inflows and RMB weakening.

Key data to watch include: GDP (quarterly, reflecting macroeconomic conditions), PMI (monthly, official data mainly for large and medium enterprises, Caixin for small and medium), CPI (monthly, inflation measure), and Urban Fixed Asset Investment (monthly, reflecting economic activity).

USD Index and Fed Movements

The USD trend directly impacts USD/RMB fluctuations. The policies of the Fed and the European Central Bank are often critical. For example, in early 2017, the Eurozone experienced its strongest recovery since the sovereign debt crisis, with GDP growth surpassing the US, and the ECB signaling tightening, boosting the euro. After breaching 100, the USD index weakened significantly, falling 15% for the year, and USD/RMB also declined accordingly.

Official Exchange Rate Guidance Mechanism

Since China’s reform and opening in 1978, the RMB has undergone multiple management reforms. On May 26, 2017, the RMB’s midpoint rate model was adjusted from “closing price + a basket of currencies exchange rate change” to “closing price + a basket of currencies exchange rate change + countercyclical factor,” easing market cyclicality. Recent observations show this approach and pricing mechanism have a clear short-term impact on the exchange rate, but the medium- to long-term trend still depends on the overall direction of the currency market.

Offshore Renminbi Characteristics: More Volatile

Offshore Renminbi (CNH) differs significantly from onshore RMB (CNY). CNH trades in international markets (Hong Kong, Singapore), with freer trading and capital flows not restricted, reflecting global market sentiment; CNY is subject to capital controls, with the People’s Bank guiding via the midpoint rate and forex interventions, making CNH more volatile.

In 2025, despite multiple fluctuations, offshore RMB (CNH) generally showed a volatile upward trend. Early in the year, US tariffs and the USD index soaring to 109.85 caused pressure, with CNH briefly falling below 7.36, prompting the PBOC to stabilize by issuing 60 billion yuan in offshore bills and controlling the midpoint rate.

Recently, as China-US trade talks eased, China’s steady growth policies took effect, and market expectations of Fed rate cuts increased, CNH strengthened significantly. On December 15, CNH/USD broke 7.05, rebounding over 4% from the year’s high, reaching a 13-month high.

Conclusion: Key to Capturing the Appreciation Cycle

As China enters a sustained easing monetary cycle, the USD/RMB trend is becoming more clearly directional. Based on historical experience, policy-driven cycles can last up to ten years, during which short- to medium-term movements are influenced by USD trends and other events. However, investors who grasp the key factors affecting the RMB can greatly improve profit prospects.

The foreign exchange market is primarily macro-driven, with transparent data from various countries. Its large trading volume and two-way trading features make it more fair and advantageous for individual investors compared to other markets. The new appreciation cycle has begun, and success depends on making the right choices at the right time.