The new era of RMB appreciation in 2026! The USD to RMB exchange rate faces a key turning point

The story of the Renminbi took a significant turn in 2025. After three consecutive years of depreciation, the currency of Asia’s largest economy finally reversed its downward trend and successfully broke through the psychological 7.0 level. As we enter 2026, the USD/RMB exchange rate, driven by multiple factors, has officially entered a new appreciation cycle. Major international investment banks generally expect the RMB to strengthen further in the second half of this year, reaching a range of 6.70 to 6.85. What does this mean for investors? Let’s analyze in depth.

Emerging from the Depreciation Cycle: Why the RMB Finally Stabilized Below 7.0

Looking back at the three years from 2022 to 2024, the RMB exchange rate was like being “pinned” by the US dollar, depreciating to historic lows. Throughout 2025, the USD/RMB fluctuated within a broad range of 6.95 to 7.35, appreciating about 4% overall. Behind these seemingly calm numbers, market sentiment was highly volatile.

Mid-year, influenced by global tariff policy uncertainties and a surge in the US dollar index, offshore RMB briefly broke through the 7.40 barrier and even hit a new record since the 2015 “8.11 reform.” Market sentiment toward the RMB’s future was extremely pessimistic.

However, the situation changed in the second half of the year. As China-US trade negotiations progressed steadily and the US dollar index weakened, the RMB began a long rebound. By the end of December 2025, the RMB finally broke through the 7.0 mark against the dollar, reaching around 6.9623. This was not just a numerical breakthrough but a fundamental shift in market expectations—the depreciation cycle for the RMB had ended, and an appreciation trend had officially begun.

The Three Core Factors Driving USD/RMB Movement

To understand why the RMB could turn the tide, we need to look at three macro-level drivers:

First, the Fed’s policy shift and the weakening of the US dollar index

In early 2026, the Federal Reserve officially entered a new easing cycle, with the US dollar index falling back to the 98.8–98.2 range. Although markets still expect resilience in the US economy, the global “de-dollarization” trend and the dovish stance of the Fed have effectively offset the short-term rebound momentum of the dollar. This created a favorable external environment for the RMB to maintain the “6 era.”

Second, the easing of China-US economic and trade relations bringing stability expectations

In the latest round of China-US trade talks, both sides reached several consensus points: the US will reduce tariffs related to fentanyl from 20% to 10%, and the equivalent tariff increases will be suspended until November 2026. Both countries also agreed to temporarily halt export controls on rare earths and port fee measures, and to expand agricultural product purchases. Although this balance remains fragile, it at least stabilizes the RMB exchange rate environment in the short term. If the current situation persists, USD/RMB will continue a moderate appreciation trend; if tensions escalate, markets could face renewed pressure.

Third, the long-term trend of foreign capital re-allocating RMB assets

With China’s export resilience continuing and interest rate differentials easing, international capital is beginning to favor RMB assets again. This structural capital inflow provides medium- to long-term support for the RMB.

A Must-Read for Investors: How to Anticipate the Next Moves of USD/RMB?

Rather than trying to predict specific exchange rates, it’s more important to understand the underlying logic influencing the RMB. The following four dimensions can help you quickly assess the trend:

Dimension 1: Keep an eye on the People’s Bank of China’s monetary policy

Every rate cut or reserve requirement ratio reduction directly impacts RMB supply and exchange rate expectations. When policies are easing, the RMB tends to depreciate; when liquidity tightens, it tends to strengthen. For example, in 2014, the PBOC launched a loosening cycle, cutting rates six times in a row, causing USD/RMB to rise from around 6 to a peak of 7.4—this fully confirms the logic.

Dimension 2: Track China’s economic data in real time

GDP growth, PMI, CPI—these seemingly dull numbers actually determine foreign capital inflows. Stable economic growth attracts continuous foreign investment in RMB assets, pushing the exchange rate higher; slowing growth has the opposite effect. In 2024, USD/RMB rose from 7.1 to 7.3 mid-year, driven by initial signs of economic stabilization.

Dimension 3: Monitor the rhythm of the US dollar index

The USD index and USD/RMB are highly correlated. Federal Reserve and European Central Bank policies are key drivers. For instance, in 2017, as Europe’s economy recovered strongly and the ECB tightened policy, the USD index fell 15% for the year, and USD/RMB also declined accordingly.

Dimension 4: Pay attention to official policy guidance on the exchange rate

RMB is not a fully market-driven currency. The PBOC guides the exchange rate through daily midpoint quotes and counter-cyclical adjustments. The May 2017 reform introduced the “counter-cyclical factor” to mitigate excessive volatility. Understanding official policy tendencies can help you anticipate turning points.

How Will the RMB Exchange Rate Move in 2026? What Do Investment Banks Say?

Deutsche Bank notes that the recent strength of the RMB against the dollar signals the start of a long-term appreciation cycle, with a forecast of further rise to around 6.7 in 2026. Goldman Sachs is optimistic about the RMB’s outlook, expecting the 2026 target to reach 6.85 supported by policy measures.

Consensus among top investment banks points to a high probability of RMB appreciation in 2026, with the market seeking a new equilibrium between 6.90 and 7.00. The chance of a quick dip below 7.1 in the short term is relatively low.

However, investors should focus on three major variables:

1. How much downside space is there for the US dollar index? If the Fed cuts rates more than expected in 2026, it will further weaken the dollar and boost the RMB.

2. Policy signals from regulators at the 6.9 level—if the RMB appreciates too quickly, authorities may use the midpoint rate to release buffers and prevent excessive gains.

3. The actual effectiveness of China’s steady growth policies—the strength of domestic demand and stock market will directly determine the long-term bottom of the RMB.

A Five-Year Review: Why Has the RMB Always Been Volatile?

Looking at USD/RMB trends from 2020 to today, three clear phases emerge:

Appreciation (2020–2021): During the early pandemic, RMB briefly depreciated to 7.18, but as China led the economic recovery, the Fed cut rates to near zero, and China maintained prudent policies, RMB rebounded strongly to around 6.50 by year-end, appreciating about 6%. In 2021, the trend continued, with an annual average around 6.45, hitting recent highs.

Depreciation (2022–2024): In 2022, aggressive Fed rate hikes and soaring dollar index pushed USD/RMB above 7.25, with an 8% annual decline—the largest in recent years. 2023 saw continued weakness, fluctuating between 6.83 and 7.35. In 2024, despite some rebound signs, volatility remained high.

Recovery (2025–present): In 2025, the RMB finally reversed its decline, appreciating about 4% for the year. The appreciation trend further solidified in 2026.

These five years of fluctuations reflect the tug-of-war of major currency policies, global economic cycles, and market sentiment.

Why Are Offshore RMB (CNH) Fluctuations More Volatile?

Finally, note the difference between offshore RMB (CNH) and onshore RMB (CNY). Since CNH is traded in international markets like Hong Kong and Singapore without capital controls, its volatility is usually greater than CNY, which is guided by the People’s Bank of China.

In 2025, despite multiple fluctuations, CNH showed an overall oscillating upward trend. Early in the year, US tariff policies caused it to dip below 7.36. The PBOC responded with measures such as issuing 60 billion yuan in offshore bills to stabilize liquidity and adjusting the midpoint. By year-end, with easing US-China tensions and Fed rate cut expectations, CNH/USD broke below 6.95 in early 2026, reaching a 14-month high.

This indicates that, in the short term, RMB exchange rates will continue to fluctuate, but the medium- to long-term appreciation trend is becoming clearer. The key is to seize the right timing and avoid being misled by short-term volatility.