Is a new cycle of RMB appreciation here? 5 key criteria for the optimal buying opportunity in 2026

The three-year curse of depreciation since 2022 has finally been broken, and the RMB successfully broke the 7.0 psychological barrier by the end of 2025. Since entering 2026, a new upward trend for the RMB has been preliminarily established, and the market is seeking a new equilibrium. But for investors, the most critical question isn’t whether the RMB will appreciate or depreciate, but—should I buy now?

From Three Years of Depreciation to a New Appreciation Trend: The Turning Point for the RMB Has Been Confirmed

Over the past three years, the RMB faced tremendous pressure. In 2022, it depreciated by as much as 8%, with the USD/RMB exchange rate rising from 6.35 to over 7.25. The reason is simple: the Federal Reserve aggressively raised interest rates, boosting the dollar, while China’s economy struggled due to pandemic policies and a real estate crisis.

But fortunes turned. In the second half of 2025, everything began to reverse. US-China trade tensions eased, the Fed shifted from hawkish to dovish, and the dollar index fell from its high of 109 to 98. Most importantly, the RMB gained solid fundamental support—China’s exports showed remarkable resilience, and foreign investment started reallocating into RMB assets.

By December 30, 2025, the RMB officially broke through the 7.0 level, marking its strongest performance in nearly a decade. This was not a fleeting rebound but the start of a longer-term appreciation cycle. International banks generally view this trend positively; Deutsche Bank forecasts RMB/USD could reach 6.7 in 2026, while Goldman Sachs sets a target of 6.85.

How Strong Will the RMB Appreciate in 2026? The Four Major Drivers Behind It

To judge whether RMB appreciation can continue, we need to understand what drives it. Summarized, four core factors are pushing this wave of appreciation:

Structural Weakening of the US Dollar Index

In early 2026, the dollar index has fallen to around 98.2–98.8. More importantly, the Fed has officially begun a new easing cycle, with market expectations of 2-3 rate cuts this year. Each cut weakens the dollar’s appeal, supporting RMB appreciation. This is similar to 2017 when the European Central Bank signaled tightening, the euro surged, and the dollar index dropped 15%. History often repeats itself.

Fragile US-China Trade Balance

In recent Kuala Lumpur negotiations, the US agreed to reduce tariffs on Chinese fentanyl-related goods from 20% to 10%, and paused the additional 24% tariffs on reciprocal goods. Both sides also agreed to expand purchases of US agricultural products. But this balance is extremely fragile. If tensions flare again, the RMB will face immediate selling pressure. Therefore, US-China trade relations are the biggest uncertainty for RMB appreciation in 2026.

China’s Export Resilience

Despite macroeconomic challenges, China’s exports continue to show strong vitality. This attracts global capital and boosts demand for RMB. As long as exports remain robust, the RMB will have fundamental support for appreciation.

PBOC’s Policy Guidance

The People’s Bank of China (PBOC) subtly guides the exchange rate through daily midpoint quotes and counter-cyclical adjustments. In the second half of 2025, the PBOC gradually raised the midpoint, signaling expectations of RMB appreciation. Such policy signals have a noticeable short-term impact on the exchange rate.

Is It a Good Time to Buy RMB Now? Consider These 4 Variables

Investing in RMB-related currency pairs can indeed be profitable, but timing is crucial. Currently, the situation looks like this:

The RMB is expected to remain relatively strong and volatile in the short term, with a new trading corridor forming between 6.90 and 7.10. Since early 2026 has already stabilized below 7.0, the probability of a quick drop below 7.1 is low. But for continued appreciation, three major variables need to be monitored:

Variable 1: How much further can the US dollar index fall?

If the Fed accelerates rate cuts, the dollar index could weaken further below 97, directly benefiting RMB appreciation. Conversely, if the US economy proves more resilient than expected, a rebound in the dollar could pressure the RMB.

Variable 2: The PBOC’s policy signals

Will the authorities use the midpoint rate to signal “preventing too rapid appreciation” at the 6.9 level? Historically, when the RMB appreciates too quickly, the PBOC adjusts the midpoint to slow the pace. This is a typical “visible hand” at work.

Variable 3: Effectiveness of China’s growth stabilization policies

Can the real estate market truly stabilize? Will fiscal stimulus effectively boost domestic demand and the stock market? These factors will determine the long-term bottom for RMB appreciation. If economic data remain weak, foreign capital inflows may slow, weakening the upward momentum.

Master These 4 Factors to Predict RMB Appreciation Without Worry

Rather than being frightened by market volatility, it’s better to analyze RMB trends from a fundamental perspective. Investors can develop their own monitoring framework:

Step 1: Watch the People’s Bank of China’s monetary policy

The PBOC is the “behind-the-scenes driver” of RMB movement. When it cuts rates or reserve requirements, liquidity increases, RMB supply rises, and the exchange rate tends to weaken. Conversely, rate hikes or reserve ratio increases tighten liquidity and support the RMB.

Historically, in 2014, the PBOC launched a loosening cycle with six consecutive rate cuts, causing USD/RMB to rise from around 6 to 7.4, with a significant depreciation. This shows the long-term impact of monetary policy—potentially lasting a decade.

Step 2: Track China’s economic data

A strong economy means a strong RMB—an old but effective logic. When GDP growth outpaces other emerging markets, exports stay strong, and corporate profits improve, foreign capital flows in steadily, boosting RMB demand.

Key indicators include quarterly GDP, monthly PMI, CPI, and urban fixed asset investment. PMI above 50 indicates manufacturing expansion and is a leading indicator.

Step 3: Observe the dollar index’s movements

USD/RMB follows a simple rule: a strong dollar means a weaker RMB, and vice versa. In 2017, as Europe’s economy recovered and the ECB signaled tightening, the euro appreciated sharply, and the dollar index fell 15%. During that period, USD/RMB also declined in tandem.

Dollar index changes are driven by Fed policies, US economic data, and global risk appetite. Monitoring its trend helps anticipate RMB movements.

Step 4: Understand official exchange rate guidance

The RMB is not a fully floating currency. The PBOC influences it through daily midpoint quotes, incorporating counter-cyclical factors. When appreciation is too rapid, the PBOC lowers the midpoint; when depreciation is excessive, it raises the midpoint.

This “visible hand” influences short-term movements, but the long-term trend depends on market forces. Reading the subtle signals from the PBOC can give early clues to policy intentions.

What the Five-Year Historical Trends Tell Us

Reviewing USD/RMB from 2020 to 2024 reveals a clear cyclical pattern:

2020: Pandemic Reversal

Early in the year, RMB was stable, but in May, due to US-China tensions and pandemic impacts, it dipped to 7.18. As China controlled the pandemic early and recovered quickly, and with the Fed cutting rates to near zero, the RMB rebounded strongly, ending the year around 6.50.

2021: Relative Stability

China’s exports remained strong, and the PBOC maintained a steady stance. The USD/RMB stayed within 6.35–6.58, a relatively stable year.

2022: Depreciation Tsunami

This was the darkest year for RMB. The Fed’s aggressive rate hikes sent the dollar soaring, while strict pandemic policies and a real estate crisis dragged down China’s economy. RMB depreciated 8%, rising from 6.35 to over 7.25, the largest decline in recent years.

2023: Pressure and Consolidation

RMB struggled within 6.83–7.35. China’s post-pandemic recovery was weaker than expected, and the real estate debt crisis worsened. Meanwhile, high US interest rates kept the dollar index between 100–104. RMB was passively under pressure.

2024: Volatility

This year saw a “V-shaped” trend. In the first half, dollar weakness and fiscal stimulus lifted the RMB from 7.1 to 7.3. By August, offshore RMB even broke below 7.10, hitting a six-month high. But overall, volatility increased.

2025: Turning Point

Finally, a turning point arrived. The USD/RMB fluctuated between 6.95 and 7.35 throughout the year, and at year-end, broke through 7.0, marking the end of the depreciation cycle.

Why Is Offshore RMB (CNH) More Volatile?

Offshore RMB (CNH), traded in markets like Hong Kong and Singapore, exhibits much larger fluctuations than onshore RMB (CNY). The reasons are straightforward:

CNH trading is fully free, with unrestricted capital flows, reflecting real-time global market sentiment. CNY, under capital controls and exchange rate guidance, has artificially smoothed fluctuations. Therefore, observing CNH often provides earlier signals of market sentiment.

In 2025, despite multiple fluctuations, CNH showed an overall upward trend. Early in the year, US tariffs and a dollar index surge to 109.85 caused CNH to dip below 7.36. The PBOC intervened by issuing offshore bonds and controlling the midpoint. Recently, with US-China dialogue easing, economic policies improving, and Fed rate cut expectations rising, CNH strengthened, breaking below 6.95 on January 20, reaching a 14-month high.

Summary: The RMB Appreciation Cycle Has Just Begun

With China entering a sustained easing monetary cycle, a new upward trend for the RMB has been preliminarily established. Based on historical similar cycles, this appreciation momentum could last for a decade. Although short-term fluctuations will occur due to dollar movements and other events, the overall direction is clear.

For investors, understanding these four key factors—central bank policies, economic data, dollar trends, and official signals—can help identify patterns amid market complexity. The forex market is driven mainly by macro factors, with transparent data, large trading volumes, and two-way trading making it more fair and advantageous than other investment assets.

2026 will be a critical year to observe whether the RMB appreciation cycle truly begins. Seize the opportunity, make rational judgments, and you’ll be on the winning side.