Renminbi Exchange Rate Trend Analysis: Investment Opportunities in 2026 After Breaking Above 7.0

By the end of 2025, the renminbi successfully broke the psychological barrier of 7.0, marking an important market turning point — the long-term depreciation cycle that began in 2022 has come to an end. Based on the analysis of RMB exchange rate trends, we are now in the early stages of a new appreciation cycle. This shift is supported by macroeconomic factors and a reassessment of market expectations. For investors focused on RMB asset allocation, this is now an essential observation window.

Breaking the 7.0 psychological barrier, signaling a RMB reversal

2025 is a pivotal year for the RMB’s shift from depreciation to appreciation. Looking back at the year’s trend, USD to RMB fluctuated widely between 6.95 and 7.35, with a total appreciation of about 4%. For the RMB that experienced three consecutive years of depreciation from 2022 to 2024, this represents a clear market sentiment shift.

Most notably, in mid-December 2025, the RMB rebounded strongly. Driven by the Fed’s rate cuts and increased market risk appetite, the RMB surged past the 7.05 level and broke the psychological 7.0 mark by the end of the month, touching as low as around 6.9623. Entering early 2026, the RMB remained below 7.0, reflecting a significant increase in market confidence in RMB appreciation.

Offshore markets further confirm this trend. Although USD/CNH (offshore RMB) experienced slightly larger fluctuations, the overall median rate steadily declined in line with onshore markets. This internal and external linkage indicates that RMB appreciation is not just short-term speculation but is based on deeper economic fundamentals.

Four core factors determining appreciation potential: who is driving the RMB reversal?

Analyzing RMB exchange rate trends requires understanding decisive external and internal factors.

The US dollar index is experiencing a structural decline. In the first half of 2025, the dollar index fell from 109 to about 98, a nearly 10% drop, marking the weakest first half since the 1970s. Although it rebounded above 100 in November due to easing expectations of Fed rate cuts, the dollar index has since fallen back to 98.8–98.2 as the Fed officially enters easing mode in 2026. This structural weakness directly releases appreciation space for the RMB.

Stability in China-U.S. trade relations is a key support. Despite trade frictions, the latest consensus from trade talks in Kuala Lumpur signals positive developments — the U.S. agreed to lower tariffs on Chinese fentanyl, suspend retaliatory tariffs, and expand agricultural purchases. While fragile, this provides a short-term policy-friendly window for RMB. If this pattern continues into the second half of 2026, RMB appreciation environment will stabilize.

The Fed’s monetary policy leans toward easing. Market expectations for 2-3 rate cuts in 2026 remain. As the U.S. labor market balances, the Fed shifts focus to preventing a hard landing. This preemptive easing weakens U.S. Treasury yields, encouraging capital to flow back into emerging markets, directly boosting demand for RMB.

China’s export resilience and foreign capital reallocation. Despite global tariff pressures, China’s exports continue to grow, and foreign investors are reassessing RMB assets’ investment value. These factors together drive international investors to increase RMB exposure.

Major international banks are optimistic; 2026 target ranges emerge

Looking ahead, major global investment banks generally share an optimistic outlook.

Deutsche Bank suggests that the recent strength of the RMB may signal the start of a long-term appreciation cycle. They project RMB/USD could further rise to around 6.7 in 2026, still above current levels.

Goldman Sachs is also bullish, with a target of 6.85 for RMB/USD in 2026 supported by policy backing. Both banks’ forecasts converge in the 6.70–6.85 range, indicating strong market confidence in RMB appreciation.

This optimism is based on three main pillars: first, China’s export growth remains resilient; second, foreign capital inflows into RMB assets are becoming established; third, the dollar index is expected to stay structurally weak. The combination provides a solid foundation for RMB appreciation.

Should you buy RMB now? Three key variables for short-term positioning

From an investment perspective, there are opportunities to participate in RMB appreciation, but success depends on accurately gauging these three variables:

How much room is there for the dollar index to fall? The Fed’s expected 2-3 rate cuts in 2026 will determine how much further the dollar can weaken. If cuts are deeper than expected, the dollar index could reach 96–97, supporting RMB appreciation toward 6.70. Conversely, if rate hikes persist due to inflation, the dollar’s decline may be limited.

Policy stance at the 6.9 level. Whether the PBOC’s midpoint fixing signals a buffer against rapid appreciation will influence short-term volatility. If regulators worry about excessive appreciation hurting exports, they may use countercyclical factors to moderate the rise, slowing the appreciation trend.

Effectiveness of China’s growth stabilization policies. Whether domestic demand can truly stabilize in 2026 due to new policy stimuli will determine RMB’s long-term bottom. Stronger economic growth expectations will attract more foreign inflows, supporting RMB appreciation; if growth remains sluggish, upside will be limited.

Overall, in the short term, RMB is expected to oscillate strongly but remain above 7.0. Since it has already stabilized below 7.0, the chance of falling back below 7.1 soon is low. The market is searching for a new equilibrium between 6.90 and 7.00, providing a relatively clear trading range.

Four-dimensional investment framework: decoding RMB exchange rate movements

To deepen understanding of RMB trends, a systematic observation framework is essential. Regardless of market changes, the following four dimensions are key to assessing RMB movements:

1. Monetary policy orientation. The PBOC’s stance directly influences liquidity and expectations. Rate cuts or reserve ratio reductions increase money supply, likely weakening RMB; tightening policies (raising rates or reserve ratios) support RMB strength. Historical example: in 2014, six consecutive rate cuts by the PBOC led to RMB depreciation from around 6.0 to 7.4.

2. China’s economic fundamentals. Stable and outperforming growth attract foreign capital, boosting RMB demand; slowing growth or declining attractiveness reduce inflows. Key data include GDP growth, PMI, CPI inflation, and fixed asset investment.

3. USD trend. The dollar’s strength directly impacts USD/RMB. Fed and ECB policies often precede USD movements. For example, in 2017, the euro’s recovery and signals of tightening by the ECB led to a 15% decline in the dollar index, with USD/RMB also falling, illustrating high correlation.

4. Official policy guidance. Unlike free-floating currencies, RMB has experienced multiple exchange rate reforms since 1978. The 2017 introduction of the “countercyclical factor” strengthened official guidance, affecting short-term rates, but long-term trends depend on broader market directions.

Five-year review: from appreciation to depreciation, then to today’s reversal

Reviewing RMB’s past five years helps clarify current positioning and future direction.

2020: Pandemic-driven reversal. Early in the year, RMB fluctuated between 6.9–7.0, but amid US-China tensions and initial pandemic impacts, it depreciated to 7.18 in May. As China controlled the pandemic and rebounded quickly, and the Fed cut rates to near zero, RMB rebounded strongly to around 6.50 by year-end, up 6%.

2021: Export-driven strength. Continued export growth and economic recovery kept USD/RMB in a narrow range of 6.35–6.58, averaging about 6.45, with RMB remaining relatively strong.

2022: Fed’s aggressive rate hikes. The year’s defining shift — USD/RMB rose from 6.35 to over 7.25, depreciating 8%, the largest in recent years. The background: Fed’s rapid hikes, soaring dollar index, China’s strict COVID policies, and property market crises eroded confidence.

2023: Pressure but bottoming out. USD/RMB fluctuated between 6.83–7.35, averaging around 7.0. Sluggish economic recovery, continued property debt issues, and high US rates kept RMB under pressure.

2024: Increased volatility but signs of bottoming. Weaker dollar alleviated RMB pressure; China’s fiscal stimulus and property support boosted confidence. USD/RMB rose from 7.1 to 7.3 mid-year, with offshore RMB breaking 7.10 for the first time in six months, signaling a potential bottom.

This five-year trajectory shows three phases: 2020–2021 appreciation, 2022–2024 depreciation, and the recent reversal starting late 2025.

The unique role of offshore RMB (CNH) and current opportunities

In RMB trend analysis, offshore RMB (CNH) plays a special role. Traded in Hong Kong, Singapore, and other international markets, CNH is more flexible and sensitive to global sentiment, often exhibiting larger fluctuations than onshore RMB (CNY).

In 2025, despite multiple fluctuations, CNH showed an overall oscillating upward trend. Early in the year, US tariffs and dollar strength pushed CNH below 7.36. The PBOC responded with liquidity measures and managed the midpoint fixing.

Recently, market sentiment improved. As China-U.S. trade tensions eased, growth policies took effect, and Fed rate cut expectations increased, CNH strengthened. On January 20, CNH/USD broke 6.95, reaching a 14-month high, further confirming the RMB’s upward momentum.

For investors seeking RMB appreciation, offshore markets offer more flexibility and liquidity, but also come with higher volatility and risk, requiring careful position management.

Summary: seize the opportunity, develop a systematic understanding of RMB

With RMB surpassing the psychological 7.0 mark at the end of 2025, the market has clearly shifted into an appreciation cycle. Historical policy-driven cycles have lasted up to ten years, suggesting this cycle could be long.

Investors should combine short-term trading with medium-term asset allocation. In the short term, expect RMB to oscillate between 6.90 and 7.10, with trading strategies guided by USD index, domestic economic data, and policy signals. Medium-term, with positive outlooks from international banks and supportive policies, RMB could reach 6.70–6.85.

However, uncertainties remain: whether US-China relations stay stable, the depth of Fed rate cuts, and whether China’s domestic demand can truly stabilize. These variables could influence RMB’s ultimate trajectory. Therefore, any RMB investment decision should be based on continuous monitoring of these four dimensions: monetary policy, economic fundamentals, USD trend, and official guidance.

Foreign exchange markets are primarily macro-driven, with transparent data releases and large trading volumes, making them relatively fair and accessible for investors. By applying this analytical framework, deepening understanding of RMB exchange rate movements, investors can significantly improve their decision-making success rate.