The RMB's appreciation potential against the US dollar is unleashed; Goldman Sachs predicts the exchange rate will surge to 6.85 by 2026.

This year’s RMB performance has been truly impressive. As of November 26, the USD/CNY exchange rate has fallen to 7.0824, and the USD/CNH offshore RMB rate has also dropped to 7.0779, both hitting new lows not seen in over a year. Behind this is not a sudden event, but a rhythmic and step-by-step appreciation process.

Goldman Sachs analysts have made a bold prediction: by the end of the year, the exchange rate is expected to reach 7.0, and by 2026, it could approach 6.85. What is the confidence behind this forecast? The core logic is quite clear—the Federal Reserve has begun cutting interest rates, and the ceiling for RMB appreciation has accordingly moved higher.

The authorities are “defending the market,” and the exchange rate is steadily rising

The People’s Bank of China’s (PBOC) midpoint setting strategy has been signaling consistently. Through daily midpoint guidance (allowing the spot exchange rate to fluctuate within 2% of the midpoint), combined with frequent dollar-buying operations by state-owned banks, the USD/RMB exchange rate has formed a clear upward trajectory. This is not a natural market fluctuation but a deliberate, rhythmic policy implementation.

The data is most convincing. The CFETS RMB Exchange Rate Index rose to 98.22 on November 21, reaching its highest point since April this year. This indicates that in the context of dollar depreciation, the RMB has not only appreciated against the dollar but has also performed well against a basket of currencies.

A stark contrast to the 2018 depreciation

The significance of this round of appreciation is particularly profound. Looking back to 2018, amid the impact of the US-China trade war, the RMB depreciated by 5%. Yet by 2025, the RMB has appreciated nearly 3% against the trend. This is not just a numerical reversal but a strategic attitude shift.

Kiyong Seong, Chief Asia Macro Strategist at Société Générale, said it well: “Demonstrating RMB strength and stability in turbulent market conditions is the best proof of RMB internationalization.” This explains why the authorities are actively guiding the USD/RMB exchange rate higher—sending a clear signal to the international market through concrete actions: the RMB is trustworthy.

Accelerating internationalization and expanding liquidity

Data from the Bank for International Settlements (BIS) confirms this trend. Since the last survey in 2022, the daily trading volume of USD/RMB has increased by nearly 60%, reaching $781 billion, accounting for over 8% of total global daily foreign exchange trading. What does this mean? It indicates more international participants are engaging in the USD/RMB market, and the foundation for RMB international circulation is becoming more solid.

Kelvin Lam, Senior Economist at Pantheon Macroeconomics, made an interesting historical comparison. During the Asian financial crisis in 1998, the RMB firmly resisted the wave of competitive devaluation, thereby consolidating its regional anchor currency status. Today’s appreciation strategy logically continues this tradition—both are aimed at strengthening the credibility and stability of the RMB.

Policy focus is now clear

Goldman Sachs’s assessment reflects a market consensus: RMB internationalization has become a key policy focus for the Chinese government and is expected to accelerate significantly in the coming years. The Federal Reserve’s rate cuts have created a time window, while domestic policy guidance provides direction. The combination of these factors explains why the USD/RMB exchange rate shows such a clear upward trend.

What does this mean for traders and investors? It suggests that the RMB’s appreciation momentum will likely continue in the short term, but the greater significance lies in the rising international status of the RMB—more transactions settled in RMB, more assets priced in RMB, and more central banks increasing their RMB foreign exchange reserves. This is the real story behind this round of appreciation.