RMB to USD Trend Analysis: Outlook and Investment Opportunities Before 2026

Has the Renminbi Appreciation Cycle Started?

Since 2025, the trend of the Renminbi exchange rate has shown a clear turning point. The USD/RMB has fluctuated bidirectionally within the 7.04 to 7.3 range, with a cumulative appreciation of about 3% for the year, reversing the continuous depreciation over the past three years. The latest data is even more encouraging—on December 15, the RMB against the US dollar broke through the 7.05 level, then touched 7.0404, hitting a 14-month high.

This shift is no coincidence. Looking back at the first half of the year, the RMB was once pressured to the 7.40 level, even reaching a record since the 2015 exchange rate reform. But in the second half, as China-US trade negotiations steadily advanced and the US dollar index shifted from strength to weakness, the RMB began to strengthen against the trend. The market generally believes that the depreciation cycle starting in 2022 has ended, and the RMB is entering a new phase of medium- to long-term appreciation.

Three Core Drivers Promoting RMB Appreciation

To assess the future trend of the RMB, multiple dimensions need to be considered comprehensively:

Structural Weakening of the US Dollar Index

In the first half of 2025, the US dollar index declined from 109 to 98, a drop of nearly 10%, marking the weakest first half since the 1970s. Although it briefly rebounded above 100 in November due to easing rate hike expectations, after December, supported by the Fed’s rate cuts and a possible dovish stance, the dollar index fell back to the 97.8-98.5 range, even touching a low of 97.869. This is the key for the RMB—the pressure from a mildly strengthening dollar has been essentially alleviated.

Substantive Easing in China-US Trade Relations

Progress in trade and economic relations has laid the foundation for exchange rate stability. The latest round of talks in Kuala Lumpur reached a new ceasefire consensus, including lowering fentanyl-related tariffs, suspending reciprocal tariffs until November 2026, and expanding agricultural product purchases. Although similar agreements in the past (such as the Geneva agreement in May) have quickly fallen apart, the current negotiation atmosphere is clearly easing. If this trend continues, the RMB environment will keep improving; if friction intensifies, market pressure will reemerge.

Reaffirmation of China’s Economic Resilience

Despite challenges in the real estate sector, China’s export performance continues to show resilience, fiscal stimulus policies are gradually taking effect, and the trend of foreign capital reallocating into RMB assets is established. These factors collectively support the medium- to long-term appreciation expectation of the RMB.

Consensus Forecasts from International Investment Banks

Market optimism about the RMB outlook is rising:

Deutsche Bank estimates that the RMB against the USD will appreciate to 7.0 by the end of 2025, and further to 6.7 by the end of 2026, signaling the start of a long-term appreciation cycle.

Goldman Sachs offers more insightful analysis. Their global FX strategy head significantly revised upward their forecast in May, raising the expected 12-month USD/RMB rate from 7.35 to 7.0. Goldman Sachs points out that the real effective exchange rate of the RMB is undervalued by 12% compared to the ten-year average, with a 15% undervaluation against the dollar. Based on this undervaluation and ongoing trade negotiations, there is room for appreciation. Additionally, Goldman Sachs believes that the Chinese government prefers to use fiscal and other policy tools to boost the economy rather than relying on currency depreciation, which supports the RMB’s long-term trend.

Key Factors Affecting the RMB against the USD

The Pace of Federal Reserve Monetary Policy

The Fed has started cutting rates in the second half of 2024, but the magnitude and pace of rate cuts in 2025 face multiple constraints—inflation data, employment performance, policies of the Trump administration, etc., could alter decisions. If inflation remains high, the Fed may slow down rate cuts or maintain high rates, supporting the dollar; if the economy slows significantly, faster rate cuts will weaken the dollar. The RMB and the dollar index tend to move inversely.

The Policy Orientation of the People’s Bank of China

The central bank tends to adopt easing policies to support economic recovery, especially amid a weak real estate sector. Rate cuts or reserve requirement ratio reductions will release liquidity, exerting short-term downward pressure on the RMB. However, if easing is combined with strong fiscal stimulus that stabilizes the economy, the long-term outlook will favor RMB appreciation.

The Guidance Role of the RMB Central Parity Rate

Since 2017, the improved pricing model introduced an “inverse cycle factor,” strengthening the official guidance of the exchange rate and significantly influencing short-term trends. For the medium to long term, the overall direction of the currency market remains crucial.

How to Independently Judge the RMB Trend? Four Observation Dimensions

Investors do not need to rely entirely on institutional forecasts; mastering these four judgment frameworks is enough to respond to market changes:

1. The Tightness of China’s Monetary Policy

Money supply directly impacts the exchange rate. Easing policies (rate cuts, reserve ratio reductions) increase supply, leading to RMB depreciation; tightening policies (rate hikes, raising reserve requirements) tighten liquidity, supporting RMB appreciation. For example, in 2014, the central bank cut rates six consecutive times and significantly lowered reserve requirements, causing the RMB to rise from 6 to 7.4, fully demonstrating policy power.

2. China’s Economic Data Performance

Stable economic growth attracts foreign investment, increasing demand for RMB. Key indicators include quarterly GDP releases, PMI (official and Caixin) monthly data, CPI inflation, urban fixed asset investment, etc. Good economic performance = increased foreign investment = RMB appreciation.

3. The Trend of the US Dollar Index

The dollar’s movement directly determines the USD/RMB exchange rate. The policies of the Fed and the European Central Bank are critical. In 2017, the Eurozone economy exceeded expectations, and the ECB signaled tightening, leading to a 15% decline in the dollar index for the year, with USD/RMB also falling sharply; the two are highly correlated.

4. Official Exchange Rate Management Signals

The People’s Bank of China uses the central parity rate to convey policy intentions. Observing the logic behind the setting of the central rate and whether there are new interventions can help pre-judge short-term trends.

Five-Year Historical Exchange Rate Trajectory of the RMB

Understanding the past helps better predict the future:

2020: Amid COVID-19 shocks, the year started with fluctuations between 6.9-7.0. In May, tensions with the US caused depreciation to 7.18. But China quickly controlled the pandemic and recovered first; the Fed cut rates to near zero, expanding interest rate differentials supported the RMB, which rebounded to 6.50 by year-end, up 6%.

2021: Strong exports, economic recovery, prudent monetary policies, and a low dollar index kept the RMB in a narrow range of 6.35-6.58, averaging about 6.45, remaining relatively strong.

2022: The RMB appreciated above 7.25, depreciating 8% for the year—the largest decline in recent years. Aggressive Fed rate hikes pushed the dollar higher; China’s pandemic policies and real estate crisis dampened market confidence.

2023: Post-pandemic economic recovery fell short of expectations, ongoing real estate debt crises, and high US interest rates supported the dollar. The RMB fluctuated between 6.83-7.35, ending slightly stronger at 7.1.

2024: In the first half, due to a weakening dollar and China’s stimulus policies, offshore RMB broke above 7.10 in August, reaching a six-month high, with increased volatility throughout the year.

Investment Recommendations in the Current Environment

Short-term Outlook and Opportunity Windows

The RMB is expected to remain relatively strong in the short term, with a range-bound oscillation inversely correlated with the dollar, with limited amplitude. The probability of a rapid appreciation below 7.0 by the end of 2025 is low, but trading within the range remains possible.

Three Key Variables to Monitor

① USD Index trend—driven by Fed policies and global economic data

② Signals from the RMB central parity rate—an indicator of official policy stance

③ The strength and pace of China’s stabilizing growth policies—determining the foundation for long-term appreciation

Appendix: The Special Nature of Offshore RMB(CNH)

CNH is traded in international markets such as Hong Kong and Singapore, with more freedom and unrestricted capital flows, reflecting global market sentiment. Therefore, its volatility is often greater. Although CNH experienced multiple fluctuations in 2025, it overall trended upward. Early in the year, the USD index soared to 109.85, causing CNH to depreciate past 7.36, prompting the PBOC to issue 60 billion offshore bills to absorb liquidity and strictly control the central parity. Recently, with easing US-China negotiations, China’s stabilizing growth policies, and rising expectations of rate cuts, CNH has strengthened significantly, breaking 7.05 on December 15, rebounding over 4% from the start of the year, hitting a 13-month high.

Summary

As China enters a sustained easing cycle of monetary policy, the RMB/USD exchange rate is showing a clear medium- to long-term trend. Based on historical experience, such policy-driven cycles can last up to ten years, with short- and medium-term fluctuations caused by dollar movements and unexpected events. Investors who understand these influencing factors can greatly improve their profit potential. The forex market is primarily driven by macroeconomic data; with transparent and publicly available data from various countries, large trading volumes, and support for two-way trading, it is relatively fair and advantageous for individual investors.