Renminbi to US Dollar Trend Analysis and Investment Opportunities in 2026

The RMB exchange rate experienced a significant turning point in 2025: ending three consecutive years of depreciation, it successfully broke through the psychological barrier of 7.0 at the end of the year, and is now embarking on a new medium- to long-term appreciation trajectory within the 6.9 range. Analysis of the RMB against the US dollar shows that this appreciation is not a short-term fluctuation but a deep-seated change driven by multiple favorable factors stacking up. For investors, understanding the core logic behind this appreciation is more important than simply chasing short-term ups and downs.

From three years of depreciation to a new cycle of appreciation — interpreting the current RMB exchange rate

2025 marks a watershed for the RMB exchange rate. After a sustained decline over 2022–2024, the USD/RMB exchange rate fluctuated within a broad range of 6.95 to 7.35 throughout the year, ultimately appreciating by about 4%, reversing the depreciation cycle.

Specifically, in the first half of the year, the RMB faced considerable pressure. Rising global tariff uncertainties and the continued strength of the US dollar index caused offshore RMB to dip below 7.40. During this period, the USD/RMB even hit a new high since the 2015 “8.11” reform, with market expectations leaning heavily toward RMB weakening.

The turning point came in the second half. As US-China trade negotiations advanced and bilateral relations showed signs of easing, coupled with the USD index shifting from strength to weakness, the RMB began to reverse its downward trend. By mid-December, expectations of Fed rate cuts and market sentiment improved simultaneously, pushing the RMB past the 7.05 level. By the end of December, this upward momentum was further confirmed, with the USD/RMB officially falling below 7.0, reaching around 6.9623.

This appreciation is not an isolated phenomenon — against the backdrop of the euro, pound, and other major non-dollar currencies generally strengthening, the RMB’s appreciation against the dollar has shown a gentle and steady character, and market sentiment has stabilized accordingly.

Four core factors driving the USD/RMB trend

To understand the future direction of the RMB, it’s essential to examine the main variables influencing the exchange rate from both domestic and international perspectives.

Structural shift in the US dollar index

In 2025, the USD index experienced intense volatility. In the first half, it plummeted from a high of 109 to around 98, a decline of nearly 10%, marking the weakest first half since the 1970s. After November, although market expectations of Fed rate cuts cooled and US economic data outperformed expectations, causing the USD index to rebound above 100, this rebound was limited.

Entering 2026, with the Fed officially beginning a new easing cycle, the USD index has retreated to oscillate between 98.8 and 98.2. Despite continued expectations of US economic resilience, the global de-dollarization trend and the dovish stance of the Fed offset the short-term rebound momentum. This structural weakening of the dollar has created an external environment conducive to the RMB maintaining a “6 era.”

Fragile balance in US-China economic and trade relations

Although phase-wise progress has been made in US-China trade talks — such as reducing tariffs on fentanyl-related goods from 20% to 10%, extending some tariff suspensions, and expanding US agricultural purchases — this balance remains fragile.

Whether this can be sustained into the second half of 2026 as genuine improvement is the most critical external uncertainty in the long-term USD/RMB outlook. If the status quo persists, the RMB exchange rate environment is likely to stay stable; if tensions escalate, the market will face renewed depreciation pressures.

Dovish shift in Fed policy

In 2026, markets generally expect the Fed to have room for 2–3 rate cuts. Although inflation data fluctuate occasionally, with labor markets balancing, the Fed’s focus has shifted to preventing a hard landing. This preemptive easing reduces the attractiveness of US Treasuries, alleviates interest rate differentials, and encourages capital to flow back into emerging markets, thereby boosting the RMB’s relative position.

Coordination of Chinese monetary and fiscal policies

The People’s Bank of China continues to implement easing monetary policies to support economic recovery, especially amid sluggish real estate and weak domestic demand, possibly through rate cuts or reserve requirement ratio reductions to inject liquidity. In the short term, this may exert downward pressure on the RMB; however, if easing is coupled with stronger fiscal stimulus that stabilizes the economy, it can enhance the RMB’s attractiveness in the long run.

How do international investment banks view the RMB trend in 2026?

The market generally believes that the RMB is at a cyclical turning point, with the depreciation cycle starting in 2022 coming to an end, and the RMB having the opportunity to enter a new medium- to long-term appreciation phase.

Looking ahead to 2026, three main factors are expected to support further strengthening:

1. Resilient Chinese export growth — despite external uncertainties, China’s manufacturing sector remains a key part of global supply chains.

2. Reallocation of foreign capital into RMB assets — as China’s economic growth stabilizes, foreign demand for RMB assets begins to recover.

3. Structural weakness of the US dollar index — the global de-dollarization trend and ongoing Fed easing provide long-term support.

Major international banks are notably optimistic about the RMB’s prospects. Deutsche Bank notes that a strengthening 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 also remains bullish, with a target of 6.85 in 2026 supported by policy measures.

These forecasts are based on in-depth fundamental analysis, reflecting a consensus in international capital markets about RMB appreciation.

Investment decision framework during the RMB appreciation cycle

Short-term outlook

In the near term, the RMB is expected to remain strong with some volatility. After successfully breaking the 7.0 psychological barrier at the end of 2025, it now shows a close correlation with the USD index, with strong support around 6.9. Since it has already stabilized below 7.0 in early 2026, the likelihood of a quick return below 7.1 is low, and the market is seeking a new equilibrium between 6.90 and 7.00.

Three key variables to monitor closely

To track RMB performance, focus on:

• Downside potential of the USD index — whether Fed rate cuts will further weaken the dollar, affecting external support

• Official policy signals — whether regulators will use the midpoint rate or other tools to prevent rapid appreciation, reflecting policy stance

• Domestic growth stabilization policies — the strength of China’s 2026 economic stimulus and its impact on domestic demand and stock markets, which will influence the RMB’s long-term bottom

Five-year exchange rate review: lessons from history

Understanding the RMB’s future also requires reviewing its evolution over the past five years.

2020’s V-shaped reversal

Early 2020, USD/RMB fluctuated between 6.9 and 7.0. Amid US-China trade tensions and the pandemic, RMB depreciated to 7.18 in May. However, as China quickly controlled COVID-19 and economic recovery accelerated, combined with Fed rate cuts to near zero and China’s steady policies, the interest rate differential provided support, and RMB rebounded strongly to around 6.50 by year-end, appreciating about 6% for the year.

2021’s relative stability

With sustained strong exports and economic growth, RMB remained resilient. The People’s Bank maintained steady policies, and the USD index stayed low. USD/RMB traded within 6.35–6.58, averaging about 6.45, reflecting optimism about China’s outlook.

2022’s sharp decline

This year saw USD/RMB rise from 6.35 to over 7.25, a depreciation of about 8%, the largest in recent years. The aggressive Fed rate hikes boosted the dollar index, while China’s pandemic measures, real estate crisis, and market confidence issues weighed heavily.

2023’s stagnation and volatility

USD/RMB fluctuated between 6.83 and 7.35, averaging around 7.0. China’s post-pandemic recovery fell short of expectations, the property debt crisis persisted, and US high rates kept RMB under pressure, leading to a tug-of-war market.

2024’s complex shift

A weakening dollar eased RMB pressure. Fiscal stimulus and real estate support measures boosted confidence. Mid-year, USD/RMB rose to about 7.3; offshore RMB broke 7.10 in August, reaching a six-month high, with increased volatility reflecting policy adjustments.

Core analytical framework for investors

Beyond surface-level fluctuations, investors need to understand the underlying drivers of RMB exchange rates. The following four dimensions form a comprehensive analysis framework:

1. Monetary policy’s impact on supply

The People’s Bank of China’s monetary stance directly influences currency supply. Rate cuts or reserve requirement ratio reductions increase supply, pushing RMB lower; rate hikes or reserve ratio increases tighten liquidity, supporting RMB. Historical cases, such as the series of rate cuts and RRR reductions starting in November 2014, saw USD/RMB rise from 6 to over 7.4.

2. Economic data attractiveness logic

Stable economic growth in China attracts foreign capital, increasing demand for RMB and pushing up the exchange rate; economic slowdown has the opposite effect. Key data include GDP growth (quarterly), PMI indices (monthly, official and Caixin), CPI inflation (monthly), and urban fixed asset investment (monthly).

3. USD trend and international policy linkage

USD movement directly affects USD/RMB. The policies of the Fed and ECB are key. For example, in 2017, strong recovery in the Eurozone and signals of tightening by the ECB led to euro appreciation and a 15% decline in the USD index, with USD/RMB also falling, illustrating their correlation.

4. Official policy guidance

RMB is not fully freely convertible. In 2017, the central parity rate model was adjusted to include an “inverse cycle factor” to mitigate market procyclicality, strengthening official guidance. Short-term, this influences exchange rate direction; medium- and long-term trends depend on the overall monetary policy stance.

Differences between offshore (CNH) and onshore (CNY) RMB

It’s important to note that offshore RMB (CNH) and onshore RMB (CNY) can behave differently. CNH, traded in Hong Kong, Singapore, and other international markets, faces fewer capital controls and reflects global sentiment more directly, often exhibiting larger fluctuations.

In 2025, despite multiple swings, offshore RMB showed an overall oscillating upward trend. Early in the year, US tariffs and the USD index soaring to 109.85 caused CNH to dip below 7.36, prompting PBOC stabilization measures. Recently, with easing US-China relations, stabilization policies, and Fed easing expectations, CNH has strengthened significantly, breaking 6.95 in late January to reach a 14-month high.

Summary and outlook

The RMB is at a crucial turning point. As China enters a sustained easing monetary cycle, the USD/RMB trend analysis indicates a clear appreciation tendency. Historical experience with similar policy cycles suggests this phase could last a decade, with short- to medium-term fluctuations driven by USD movements and other events, but the overall direction remains upward.

To capitalize on this appreciation cycle, investors should:

1. Build a systematic monitoring framework — avoid being misled by short-term volatility; track monetary policy, economic data, USD trends, and policy signals continuously.

2. Understand cyclical features — recognize that RMB appreciation is not smooth; there will be adjustments and reversals, but the main trend is upward.

3. Identify trading windows — adjust positions timely when the market reassesses key factors, rather than passively chasing rallies or panicking on declines.

Foreign exchange markets are primarily macro-driven, with transparent data releases and large trading volumes allowing two-way trading, providing a relatively fair environment for investors. Mastering the correct analytical framework can significantly improve profitability during the RMB appreciation cycle.