USD to RMB Exchange Rate Forecast: Investment Opportunities and Risks in the First Half of 2026

The RMB depreciation cycle is a thing of the past. After three consecutive years of decline, the yuan broke through the psychological level of 7.0 at the end of 2025, and is now establishing new support around the 6.9 range. Looking ahead to 2026, several international investment banks are optimistic about the USD/RMB trend, believing the yuan may enter a new appreciation cycle with target prices between 6.70 and 6.85.

Behind this reversal are three key supports: China’s continued export resilience, the gradual establishment of foreign capital rebalancing into RMB assets, and the structurally weak US dollar index. For investors, the key question is whether to buy RMB-related currency pairs now, which depends on understanding market cycles and timing.

Drivers of the New RMB Appreciation Cycle

Where does the turning point in 2025 come from? To forecast USD/RMB, we must first understand the fundamental drivers of this rebound.

In the first half of the year, the RMB faced heavy pressure. Global tariff uncertainties and the Fed’s ongoing rate hikes pushed the dollar index above 109, approaching the extreme levels since the August 2015 “8.11” exchange rate reform. Offshore markets saw RMB weaken past 7.40. But in the second half, sentiment shifted. The Fed’s rate cut cycle began, US-China trade negotiations advanced, and non-US currencies like the euro appreciated, creating windows for RMB rebound.

By the end of 2025, the RMB finally stabilized below the psychological 7.0 level, touching around 6.9623. This was not just a numerical breakthrough but a sign of a fundamental shift in market expectations—from persistent weakness to potential strength.

Four Key Variables Influencing USD/RMB

To judge the 2026 trend, four dimensions must be monitored:

Structural Shift in the US Dollar Index

In 2025, the dollar index experienced a “V” shape. It fell from 109 at the start of the year to 98 in May, a nearly 10% decline—the weakest performance in the first half since the 1970s. But in November, as Fed rate cut expectations cooled, the dollar rebounded above 100. Entering 2026, with the Fed adopting a dovish stance, the dollar index retreated to between 98.2 and 98.8. The global de-dollarization trend and the easing cycle temporarily offset the dollar’s short-term rebound momentum, supporting the “6 era” for the RMB.

Fragile US-China Economic and Trade Balance

In recent US-China talks, the US lowered tariffs on fentanyl-related goods from 20% to 10%, and suspended the 24% tariff increase until November 2026. Both sides agreed to pause restrictions on rare earth exports and port fees. This ceasefire reduced market anxiety, but the fragile balance remains. Whether US-China relations can stay stable into the second half directly limits the RMB’s upside and downside. Any escalation of friction could reintroduce pressure.

Fed Policy and Interest Rate Differentials

In 2026, there’s room for 2-3 rate cuts. As the labor market stabilizes, the Fed’s focus shifts to preventing a hard landing. This preemptive easing weakens US Treasury yields’ attractiveness, easing interest rate differentials, and gradually redirects capital to emerging markets, boosting demand for the RMB.

China’s Policy Mix

The People’s Bank of China tends to maintain easing to support economic recovery, especially amid a sluggish property market. While easing policies generally exert downward pressure on the currency, if combined with strong fiscal stimulus that stabilizes the economy, it can lead to long-term RMB appreciation. The strength and persistence of this policy mix determine the RMB’s attractiveness.

How Do Investment Banks View the 2026 USD/RMB Outlook?

Major international banks have shifted to a more optimistic stance.

Deutsche Bank suggests that recent RMB strength may signal the start of a long-term appreciation cycle, with a forecast of RMB reaching 6.7 in 2026. Goldman Sachs is bullish, setting a target of 6.85, based on China’s export recovery, foreign capital reallocation, and a structurally weaker dollar index.

The market generally sees the RMB exchange rate at a turning point. The depreciation cycle starting in 2022 appears to be over, and a medium- to long-term appreciation trend may be underway. But this does not mean a straight line up—volatility and corrections are inevitable.

Is Now a Good Time to Buy RMB? Practical Entry Timing

This is the most practical question. The simple answer: yes, but timing is crucial.

In the short term, RMB is likely to fluctuate with strength. Since it has stabilized below 7.0 at the end of 2025, 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. Investors face the key decision: buy now or wait?

Short-term Opportunity Window

Given the technical support near current levels, rebound potential is limited, and the upward slope in the short term may not be steep. However, accumulating in tranches within the 6.95–7.00 range can lower average costs.

Three Key Variables to Watch Closely

• How much further can the dollar index fall? If Fed rate cut expectations intensify, the dollar could drop below 98, directly boosting RMB.
• Will regulators signal to prevent rapid appreciation at the 6.9 level? Through guiding the midpoint rate, authorities may buffer the pace of appreciation.
• How effective are China’s policies to stabilize growth in boosting stocks and domestic demand? This will influence the long-term bottom of the RMB forecast.

Analyzing the USD/RMB Outlook Through Four Dimensions

Sharing knowledge is better than giving fish. Regardless of market changes, the RMB trend can be analyzed through these frameworks:

1. The Tightness of Central Bank Monetary Policy

The PBOC’s stance is the core driver. Easing (rate cuts, reserve ratio reductions) increases money supply, naturally pushing USD/RMB higher; tightening (rate hikes, reserve ratio hikes) supports RMB strength. In 2014, the PBOC launched six consecutive rate cuts, during which USD/RMB rose from 6 to nearly 7.4, illustrating policy impact.

2. Relative Performance of China’s Economy

Economic data influence medium-term RMB trends. Stable growth attracts foreign inflows, increasing demand for RMB; slowing growth does the opposite. Key indicators include:

• GDP (quarterly) — macroeconomic health
• PMI (monthly) — leading indicator, manufacturing and services
• CPI (monthly) — inflation, may trigger policy adjustments
• Urban fixed asset investment — reflects domestic demand strength

3. US Dollar Index and Global Currency Dynamics

USD movements directly impact USD/RMB. For example, in 2017, Europe’s economic recovery outperformed the US, causing the dollar index to fall 15%, and USD/RMB followed suit. The Fed and ECB policies are key determinants.

4. Official Guidance on Exchange Rate

Unlike freely floating currencies, RMB is managed via the central bank’s midpoint and counter-cyclical factors. Since 2017, the improved pricing model has strengthened official guidance. In the short term, signals from authorities significantly influence the trend; long-term, market supply and demand dominate.

Five-Year RMB Exchange Rate Review

Understanding past trends helps forecast the future. What do the past five years tell us?

2020: Appreciation amid pandemic

Start at 6.9–7.0, May dipped to 7.18 amid US-China tensions, but as China controlled COVID-19 early and the Fed cut rates to near zero, the interest gap supported RMB rebound, ending the year at around 6.50, up about 6%.

2021: Export-driven stability

Strong exports, steady policies, and a low dollar index kept USD/RMB in a narrow 6.35–6.58 range, averaging about 6.45, maintaining RMB strength.

2022: Largest depreciation year

From 6.35 to over 7.25, a roughly 8% decline—the biggest in recent years. Aggressive Fed hikes, soaring dollar index, COVID restrictions, and property crises dampened confidence.

2023: Continued pressure

Range of 6.83–7.35, average around 7.0, ending near 7.1. Sluggish recovery, ongoing property debt issues, and high US rates kept RMB under pressure.

2024: Volatility year

Dollar weakened, easing China’s fiscal stimulus boosted markets. USD/RMB rose from 7.1 to about 7.3 mid-year, offshore RMB broke 7.10 to a six-month high in August, with increased volatility setting the stage for future rebounds.

Market Sentiment Reflected in Offshore RMB (CNH)

Offshore RMB (CNH) trading in Hong Kong, Singapore, etc., reflects global sentiment more freely than onshore (CNY), which is subject to capital controls and official guidance. CNH tends to be more volatile.

In 2025, despite multiple fluctuations, CNH showed a rising trend. Early in the year, US tariffs pushed USD index to 109.85, and CNH weakened past 7.36. The PBOC issued 60 billion offshore bonds to drain liquidity and stabilized the midpoint. Recently, with warming US-China relations, growth policies, and Fed rate cut expectations, CNH strengthened significantly, breaking 6.95 and reaching a 14-month high.

This shift from deep depreciation to gradual appreciation reflects a change in international investor sentiment—from pessimism to cautious optimism.

Summary: Investment Insights for 2026 USD/RMB

As China enters a sustained easing cycle, USD/RMB is showing a clear trend. Historically, such policy cycles can last several years to a decade, with short- and medium-term fluctuations driven by dollar movements and external events.

By monitoring central bank policies, economic data, dollar trends, and official guidance, investors can significantly improve their judgment accuracy. The FX market is macro-driven, with transparent data releases and large trading volumes supporting fair and liquid trading.

The current opportunity lies in the fact that the RMB appreciation cycle has begun but is not yet fully realized. Applying the logic of USD/RMB forecasts, looking for entry points between 6.90 and 7.00 could be a strategic approach for the first half of 2026.