Written by: ChandlerZ, Foresight News
By the end of 2025, the foreign exchange market is experiencing a quiet yet intense asset re-pricing.
In late December, the offshore RMB (CNH) against the US dollar broke through the 7.0 psychological threshold intraday, reaching a high of 6.99, a new high since Q3 2024. Onshore RMB also touched 7.0133 against the dollar.
While the official exchange rate was still battling around the 7.0 mark, the OTC USDT price had already rarely fallen below 6.90 earlier. Before press time, multiple exchanges showed the OTC USDT price (buy 1) at about 6.83 yuan, which, compared to the current exchange rate of 7.0040, indicates a USDT negative premium rate of 2.48%.
Such an inversion was almost unimaginable during the past three years of dollar strength.
The Collapse of the US Dollar “High Ground”
The decline of the US dollar in 2025 is the most significant external factor supporting the RMB’s strength.
In 2025, the US dollar index plummeted by 9% throughout the year, marking its worst performance in eight years, logically reflecting a reassessment of global capital’s view on “US Exceptionalism.”
First is the pull of valuation reversion. Although the dollar index has rebounded nearly 2% from September lows, fundamentally, the dollar remains “ridiculously” expensive. According to the Bank for International Settlements (BIS), as of October, the dollar’s real broad effective exchange rate (REER) had fallen from a record high of 115.1 in January to 108.7, but still remains at an absolute high. Corpay, a global corporate payments company, chief market strategist Karl Schamotta, bluntly states: “From a fundamental perspective, the dollar is still overvalued.”
The line chart shows that due to years of sustained appreciation, this year’s correction has had little impact on the dollar’s overvaluation.
Second is the dovish expectations for the new Federal Reserve. The market is pricing in a more easing-oriented 2025. With Powell set to leave soon, and the Trump administration inclined to pursue low-interest-rate policies, including popular successor candidates like White House economic advisor Kevin Hassett and former Fed governor Kevin Warsh, all show clear dovish tendencies.
Reuters pointed out in year-end market reports that the dollar index’s decline is mainly driven by expectations of Fed rate cuts, narrowing interest rate differentials with other economies, and risk premium changes due to US fiscal deficits and political uncertainties.
When the relative returns and safety premiums of dollar assets are re-priced, non-US currencies gain some upward momentum.
Institutional Consensus: Short-term Inertia Upward, Long-term Game Intensifies
Once the psychological 7.0 threshold is broken, the biggest market question is whether this marks the start of a new long-term RMB appreciation cycle or a short-term emotional rebound.
Standing at the threshold of 2026, mainstream institutional consensus is becoming more cautious: short-term inertia upward, long-term game intensifying.
Huachuang Securities believes that, in terms of domestic supply and demand, the core factor is foreign exchange settlement and sales. Although December settlement data has not yet been released, logically, RMB appreciation itself will influence corporate settlement expectations and behavior. Coupled with the seasonal tendency for strong settlement at year-end, these factors may jointly drive the second phase of appreciation with a relatively strong domestic supply and demand response. On one hand, the continued RMB appreciation will impact corporate settlement decision expectations; on the other hand, net settlement tends to be stronger at year-end.
However, the Guotai Haitong Securities macro research team also points out that expectations of RMB appreciation are not unimpeded. Using gold purchasing power parity to measure domestic expectations, volatility in 2025 is actually quite high. In April, trade frictions once caused domestic depreciation expectations to reach above 7.5, while in September, the Fed’s rate cut cycle pushed domestic appreciation expectations back near 7.0. The fundamental reason is that, in an environment where internal economic resilience has not yet clearly emerged, most investors remain somewhat hesitant about the trend of appreciation.
Why is there a deep discount in USDT?
Crypto market data analyst @Phyrex_Ni explains that the main reasons for the deep discount in USDT are threefold:
First: On the macro front, RMB has been strengthening against the dollar, especially since the second half of 2025. The reasons include the continuation of the Fed’s rate cut cycle, a weakening dollar index, and improving Chinese economic data. Holding USDT is equivalent to indirectly holding dollar assets, which incurs exchange rate losses amid RMB appreciation. In other words, the market expects RMB to continue strengthening, leading to some exchange rate deviations, but this is not the main reason—only a minor secondary factor.
Second: China’s regulatory policies have significantly tightened. In early December 2025, the People’s Bank of China and thirteen other departments jointly issued a document to strengthen crackdowns on virtual currency trading and speculation, explicitly bringing stablecoins (like USDT) under regulatory scope, focusing on illegal cross-border capital flows, money laundering, and underground banking activities involving USDT. This has led many OTC traders and market participants to pause or reduce operations, tightening market liquidity. Some holders worry about account freezes or regulatory risks, rushing to sell USDT for RMB, increasing supply and sharply reducing demand, directly depressing P2P prices. Historically, every regulatory upgrade in China (such as the 2021 ban) has caused USDT OTC negative premiums, and this time’s stronger crackdown amplifies the USDT-RMB exchange rate deviation.
Third: The overall turbulence in the crypto market, combined with regulatory bearish signals, has reduced demand for USDT among retail and institutional investors. Some mainland investors, seeking to avoid risks, want to quickly offload their USDT holdings, creating a negative premium cycle similar to China’s current real estate market.
Under the dual pressure of macro cycle shifts and tightening regulatory boundaries, the past three years of a “buy-and-hold” dollar hedging logic have completely failed.
For all market participants, the key task now is no longer to bet on whether the next point will be 6.8 or 7.0, but to move away from dependency on a one-sided dollar appreciation path. In the future with increased volatility, return to risk neutrality.
