The RMB exchange rate strengthens and breaks through 6.87, rising nearly 300 points in one month

Reporter | Ye Maishui

Editor | Yang Xi, Zeng Fang

After the Spring Festival holiday, the RMB exchange rate has seen a strong start. On February 25, during trading, offshore RMB against the US dollar rose to 6.8619 at one point, while onshore RMB touched 6.8654, both hitting new highs since April 2023, with increases of over 130 basis points.

The market believes that China’s exports are expected to continue growing rapidly in the first quarter of this year. Coupled with the current positive sentiment in the foreign exchange market, the likelihood of a sharp rebound in the US dollar index in the short term is low. It is expected that the RMB exchange rate will remain relatively strong for a period after the Spring Festival.

RMB exchange rate has surged nearly 300 basis points in one month, and the reason has been identified

The forex market has seen a “good start,” with two consecutive trading days of significant gains. On February 24, the onshore RMB against the US dollar appreciated to 6.8804 during trading, and offshore RMB reached 6.8760, both hitting new highs since April 28, 2023.

On February 25, this trend continued. The midpoint rate of RMB against the dollar was raised by 93 basis points to 6.9321. Both onshore and offshore rates continued to rise, with offshore RMB against the dollar reaching 6.8619 at one point, and onshore RMB touching 6.8654, both setting new highs since April 2023.

Since breaking the 7.0 mark at the end of December 2025, the RMB exchange rate has continued its appreciation trend at the start of 2026, remaining below 7.0, with offshore rates peaking at 6.9957.

Since February, the RMB against the dollar midpoint rate has appreciated by nearly 300 basis points, with both onshore and offshore RMB against the dollar appreciating by over 1%.

Meanwhile, the US dollar index has declined by 0.6% this year.

Regarding recent changes in the RMB exchange rate, Wang Qing, Chief Macro Analyst at Dongfang Jincheng, stated that the RMB has appreciated against the dollar quickly after the holiday, continuing the relatively strong trend since December 2025.

The underlying reasons may include: first, since November 2025, China-US trade relations have stabilized, and China’s overall external environment has improved, which is an important background for the RMB’s strength during this period.

Second, recently, the US Department of Justice launched a criminal investigation into Federal Reserve Chair Powell, impacting the Fed’s independence and putting pressure on the dollar. The new Fed chair candidate’s “rate cut + balance sheet reduction” stance has not reversed the dollar’s weakness. The dollar’s relative softness has driven the appreciation of non-dollar currencies, including the RMB.

Finally, after the RMB’s continuous appreciation recently, the previously accumulated foreign exchange settlement demand from high exports has been accelerating.

Latest foreign exchange settlement and sales data show that in December 2025 and January 2026, bank foreign exchange settlement surpluses reached $99.93 billion and $88.76 billion respectively, ranking first and third in history for single-month surpluses. Notably, the offshore RMB rally during this period, reflecting high market sentiment, has also been a key factor in supporting the RMB’s strength and breaking important resistance levels.

Wang Qing believes that in the short term, considering the potential continuation of external stability, China’s exports in the first quarter will maintain relatively rapid growth. Coupled with high market sentiment, the possibility of a sharp rebound in the US dollar index in the near future is low. The RMB is expected to remain relatively strong for a period after the Spring Festival.

It is also worth noting that recent fluctuations in US tariffs have had little impact on the US dollar index or the RMB exchange rate.

According to Zhang Wei, Analyst at Caitong Securities, the main reason for RMB appreciation is the weakness of the US dollar, not the strength of the RMB itself. This round of RMB appreciation is mainly passive, driven by the continued weakness of the dollar. Additionally, the concentrated release of foreign exchange demand after September 2025 has also accelerated RMB appreciation.

More importantly, the resilience of the domestic economy provides some support for the RMB. On January 19, 2025, the National Bureau of Statistics released data on the country’s economic performance. Preliminary calculations show that the annual GDP was 14,018.79 billion yuan, a 5.0% increase over the previous year at constant prices.

RMB’s sharp rise may boost the stock market

Looking ahead, the RMB against the dollar will mainly depend on three factors: US dollar trends, changes in China’s external trade environment, and the effectiveness of domestic growth stabilization policies.

Wang Qing believes that during the current period of RMB strength, one should not ignore the potential for RMB depreciation against the dollar in the future. On one hand, the US dollar index has fallen significantly since 2025, which has already priced in various negative factors such as Fed rate cuts. In 2026, the dollar index is expected to stabilize, especially considering the impact of the new Fed chair’s “rate cut + balance sheet reduction” stance. This suggests that the passive upward momentum of RMB against the dollar will weaken markedly this year.

On the other hand, in February, the US Supreme Court ruled that the US government’s global reciprocal tariffs and certain fentanyl tariffs were unconstitutional. The US government responded with new alternative tariffs for 150 days and ordered the Office of the US Trade Representative to invoke Section 301 of the Trade Act of 1974 to initiate investigations into “unfair trade practices,” seeking to impose tariffs on specific trading partners and products.

This indicates increased uncertainty in US tariff policies in 2026.

As the negative impact of high US tariffs on global trade and China’s exports gradually becomes apparent, China’s export growth may slow in 2026, foreign exchange settlement demand could decline, and external uncertainties might cause fluctuations in the forex market sentiment. However, macro policies aimed at stabilizing growth, adjustments in the real estate market, and maintaining GDP growth around 5.0% will provide key support for keeping the RMB exchange rate at a reasonable and balanced level.

Wang Qing believes that if the RMB exchange rate deviates sharply from fundamentals in 2026, including rapid rises or falls, regulatory authorities will decisively intervene using tools such as midpoint rate adjustments, releasing clear policy signals. Historical experience shows these tools can effectively guide market expectations and prevent excessive exchange rate fluctuations. Based on this, the RMB/USD exchange rate in 2026 is expected to fluctuate within a range of 7.0 to 7.2 around the central value.

Previously, the People’s Bank of China issued the “Q4 2025 Monetary Policy Implementation Report,” which continued to emphasize the “basic stability” of the RMB exchange rate. It highlighted maintaining flexibility, strengthening expectations guidance, and preventing overshoot risks. It also added that the exchange rate should “play the role of macroeconomic and balance of payments automatic stabilizers,” further elevating the policy positioning and emphasizing the exchange rate’s role as an automatic stabilizer of macroeconomic stability.

Chen Xingwen, Chief Strategist at Kaisa Capital, also told reporters that the RMB is likely to remain relatively strong in the short term. From the international environment, the US dollar index is expected to remain relatively weak under the influence of Fed rate cuts, providing external conditions for RMB appreciation.

However, the People’s Bank’s policies to stabilize the exchange rate will prevent excessive unilateral appreciation of the RMB. The RMB exchange rate is expected to fluctuate within a reasonable range. In the medium to long term, RMB appreciation remains a major trend, but at a moderate pace. The continuous improvement of China’s economic fundamentals, technological progress, trade structure optimization, and balanced capital flows will collectively support the RMB exchange rate.

Nevertheless, uncertainties such as the pace of global economic recovery and US-China trade relations may cause temporary impacts on the RMB exchange rate.

Tang Jianwei, Deputy General Manager of the Financial Markets Department at Bank of Communications and a member of the Chinese Financial Society, previously pointed out that the future RMB exchange rate is unlikely to experience rapid unilateral appreciation or depreciation but will show “moderate appreciation, two-way fluctuations, and range-bound operation.”

The People’s Bank of China’s goal remains to keep the RMB exchange rate basically stable at a reasonable and balanced level, firmly correcting market bets on a one-sided trend.

The future drivers of RMB exchange rate movements will include “external space for dollar weakness,” “internal resilience of the economy and trade,” and “the central bank’s policy intentions to maintain dynamic stability.” Additionally, the shift of enterprises from “holding foreign exchange and waiting” to “actively settling foreign exchange” will be a key variable influencing future RMB performance.

It is worth noting that RMB appreciation will have a positive impact on capital markets. In the short term, stock market performance may be boosted, and RMB-denominated assets could appreciate in tandem. Goldman Sachs, an international investment bank, conducted a review of US stocks, showing that a 0.1% rise in the exchange rate can increase stock valuations by 3% to 5%.

However, RMB appreciation may also increase the cost of cross-border investments. For example, in Hong Kong Stock Connect, Cross-border Wealth Management Connect, and mutual recognition funds, when RMB appreciates during the holding period, the final returns could be discounted.

(Edited: Wen Jing)