The RMB breaks above 6.84, and those with high-interest fixed deposits in USD are panicking! A 4.5% interest rate can't offset exchange rate losses, with some seeing a principal of 100,000 decline by over 2,000.

The foreign exchange market will stir again at the beginning of 2026.

On February 26, the USD to CNY and USD to offshore RMB exchange rates both hit intraday lows of 6.8310 and 6.8266, respectively. This means that since breaking the 7.0 mark at the end of 2025, the RMB exchange rate continued its appreciation trend into the new year and reached a recent high.

Against the backdrop of accelerating RMB appreciation, it may not be good news for investors holding USD assets. Early last year, many investors painstakingly exchanged RMB for USD, expecting high-yield USD financial products and savings to outperform the domestic market. However, reality delivered a heavy blow: many USD products appeared to offer annualized yields of 3%-5%, but after converting to RMB, the depreciation of the exchange rate not only wiped out all interest gains but also caused principal losses.

“Last February, when the exchange rate was around 7.3, I bought a one-year USD fixed deposit from a foreign bank with 100,000 RMB, at an interest rate of 4.5%. Now, as it matures soon, if I convert at around 6.8, I won’t make a profit—my principal will actually lose over 2,000 yuan,” said Ms. Liu (pseudonym) from Jiangsu, to Times Finance. She added that USD financial products were very popular early last year, and she was attracted by the nearly 5% high interest, so she exchanged currency and invested without paying attention to exchange rate risks.

Looking at the beginning of 2026, for investors holding USD assets, the most troubling question is: what should they do with this money? Ms. Liu told Times Finance, “I can’t convert at a loss. When it matures, I might continue to buy short-term USD deposits. Currently, the interest rate for about three months is around 3.45%, so I will keep observing the exchange rate situation.”

For investors still holding USD assets, Tian Lihui, director of the Financial Development Research Institute at Nankai University, told Times Finance that the core principle is to return to “exchange rate neutrality” and abandon arbitrage mentality.

“Although the current USD deposit interest rate of around 3% is still higher than that of RMB, under the expectation of RMB appreciation, exchange losses can easily offset interest or even principal. Investors should clarify their allocation purpose—if they have real USD needs such as studying abroad or overseas property, they can buy foreign exchange in batches during exchange rate corrections; if there is no genuine need, speculative investment based solely on interest rate differentials is not advisable. Second, establish a diversified allocation concept by balancing foreign and domestic currency assets, stocks, bonds, and commodities to smooth volatility.”

USD depreciation causes losses for USD asset investors

In 2025, the USD index experienced its most significant annual decline since 2017, nearly 10%. As 2026 begins, the market generally expects continued weakness. Looking back, the USD against offshore RMB fell from a high of 7.42 in April 2025 to a intraday low of 6.82 on February 26 this year. In less than 12 months, the USD/RMB exchange rate has fallen by 8% in total.

Faced with the current “loss upon conversion,” many investors have started seeking alternatives. Some, like Ms. Liu, choose short-term deposits and “wait and see”; others turn their attention to safe-haven assets, “I don’t want to bother with the exchange rate anymore. When it matures, I plan to buy some gold,” said Li Ming (pseudonym), a post-90s investor who previously purchased USD deposits.

Under the dual pressures of RMB appreciation expectations and declining USD interest rates, USD deposits—once considered “hot”—are now returning from frenzy to rationality. However, Times Finance notes that some investors still see a significant interest rate spread between USD and RMB deposits and plan to buy USD at low interest rate points. It is worth noting that these investors generally have clear USD usage scenarios and are not purely engaging in speculative arbitrage.

“Maybe my child will go abroad in the future, and I will need USD as a backup. Currently, the fixed deposit interest rate is around 3%, which I think is quite cost-effective,” said one investor.

It is noteworthy that the annualized interest rate for USD deposits above 4% has become “extinct” in the market, with rates generally returning to the “3” range.

Times Finance found that since the Federal Reserve began its rate cut cycle in 2025, many banks’ one-year USD deposit rates have generally fallen to around 3%, significantly lower than at the beginning of last year. Products offering over 4% interest are now rare. However, some products still offer advantages over RMB deposits, with certain annualized yields exceeding 3.5%.

Recently, a client manager at Standard Chartered Bank told Times Finance that from February 1 to 28, qualified new customers could open 3-month, 6-month, and 1-year USD fixed deposits with annual interest rates of 3.7%, 3.6%, and 3.5%, respectively, with a minimum deposit of $20,000.

Capital Bank (China) also launched the “Youli Deposit” personal USD deposit product, which, from February 24 to March 1, allowed individual customers to open fixed deposits of at least $1,000, with interest rates of 3.65%, 3.60%, and 3.35% for 3, 6, and 12 months, respectively.

What is the future of the exchange rate?

From a macro perspective, the unilateral strength of the USD seems to have come to a temporary end. Analysts suggest that the USD exchange rate in 2026 is likely to decline overall, but under multiple disruptive factors, it will show a complex pattern of “generally weak with intermittent rebounds,” with the overall center of the exchange rate moving downward but not in a single direction.

CICC’s latest research report on February 27 also pointed out that the restructuring of the international monetary order in 2026 remains a main theme for global assets, and recommended “overweight Chinese stocks and gold,” reflecting a cautious stance toward USD assets.

On the other hand, against the backdrop of accelerating RMB appreciation, the People’s Bank of China has issued timely signals to cool the market. On February 27, the PBOC announced that to promote the development of the foreign exchange market and support enterprises in managing exchange rate risks, it would from March 2, 2026, lower the foreign exchange risk reserve ratio for forward foreign exchange sales from 20% to 0%.

Industry insiders expect that RMB exchange rates will enter a new phase of “bilateral fluctuation and moderate appreciation.” Tian Lihui told Times Finance, “In the short term, the PBOC has lowered the forward foreign exchange risk reserve ratio from 20% to 0%, aiming to prevent rapid unilateral appreciation. Coupled with seasonal foreign exchange demand weakening and the upcoming dividend season for Chinese concept stocks in the second quarter, the RMB’s appreciation pace will slow significantly. The next key level may be around 6.75, but it will be a gentle oscillation upward, not a one-way trend.”

He also believes that in the medium to long term, if China-US trade relations stabilize and the domestic economy continues to recover, the RMB still has room for appreciation. However, regulatory tools to stabilize the exchange rate are sufficient to keep it relatively stable at a reasonable and balanced level.

Wang Qing, chief macro analyst at Orient Securities, also believes that in the short term, considering the expected continuation of external stabilization, China’s exports will maintain relatively rapid growth in the first quarter. With current market sentiment high, the possibility of a sharp rebound in the USD index in the near future is low, and the RMB is expected to remain relatively strong in the period after the Spring Festival.