RMB appreciation cycle begins? Analysis of the USD to RMB exchange rate trend in 2026

Expectation of RMB Appreciation Against USD Strengthens

The RMB exchange rate trend in 2025 shows a clear turning point. Driven by improved China-U.S. trade relations and rising expectations of Federal Reserve rate cuts, the RMB appreciated against the USD to below 7.08 on November 26, reaching a near one-year high of 7.0765 at one point. This breaks the three-year continuous depreciation trend from 2022 to 2024.

Throughout the year, the USD/RMB exchange rate fluctuated bidirectionally within the 7.1 to 7.3 range, with a total appreciation of 2.40%; offshore RMB experienced even greater volatility, moving between 7.1 and 7.4, with an annual appreciation of 2.80%. This stronger performance in the offshore market reflects a gradually strengthening international capital expectation for RMB appreciation.

Historical Comparison: What Has RMB Experienced?

Reviewing the USD/RMB trend over the past five years helps clarify the current turning point:

2020-2021: Appreciation Phase
During the pandemic, China’s economy recovered first, and the Federal Reserve cut rates sharply to near zero. These factors drove RMB from around 6.9 at the start of the year to 6.50 by year-end, with an appreciation of about 6%. In 2021, the strength continued, with USD/RMB remaining in a narrow range of 6.35-6.58 throughout the year.

2022-2024: Depreciation Cycle
2022 marked a turning point as the Fed initiated aggressive rate hikes, causing the USD index to soar. RMB depreciated from around 6.35 to above 7.25, with an annual depreciation of 8%, the largest in recent years. Over the next two years, RMB remained under pressure, averaging about 7.0 in 2023, with volatility expanding to 7.1-7.3 in 2024.

2025: Reversal Signal
In the first half of the year, external pressures persisted, and RMB briefly broke below 7.40. However, in the second half, steady progress in China-U.S. negotiations and a weakening USD index led RMB to gradually rebound, with market sentiment turning positive again.

Multiple Investment Banks Favor RMB Appreciation

Market consensus is forming—that RMB may have already bottomed out in its depreciation cycle and is entering a new long-term appreciation trajectory.

Deutsche Bank forecasts RMB against USD will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Morgan Stanley also expects moderate RMB appreciation, with the USD remaining weak over the next two years, and by 2026, the USD index could fall back to 89, implying RMB/USD could reach 7.05.

Goldman Sachs is more optimistic. The bank’s analysis indicates that the real effective exchange rate (REER) of RMB is undervalued by 12% relative to its ten-year average, with an even larger undervaluation of 15% against the USD. Based on progress in China-U.S. trade negotiations and current exchange rate undervaluation, Goldman Sachs expects RMB to appreciate to 7.0 within the next 12 months, with a 3-month target of 7.2 and a 6-month target of 7.1.

This outlook is supported by the logic that China’s exports remain resilient, and the government prefers fiscal rather than monetary depreciation to stimulate the economy.

Four Key Factors Affecting USD/RMB Exchange Rate

To grasp the RMB appreciation rhythm, investors should focus on the following variables:

1. USD Index Trends
In the first five months of 2025, the USD index fell sharply by 9%, marking the worst start in history. Expectations of the Fed beginning a rate cut cycle will further weaken the USD, benefiting Asian currencies led by RMB.

2. China-U.S. Trade Negotiations Progress
Although there are signs of easing after the London talks, the sustainability remains uncertain. Continued easing would support RMB; if tensions escalate, depreciation pressures will resurface. This is the biggest medium-term uncertainty.

3. Federal Reserve Policy Direction
The magnitude and pace of Fed rate cuts directly determine USD strength. If inflation remains high, the Fed may slow rate cuts, supporting the USD; if the economy slows significantly, accelerated rate cuts will weaken the USD. RMB and USD typically move inversely.

4. PBOC Policy Signals
The People’s Bank of China tends to maintain an accommodative stance to support economic recovery. Short-term, loose monetary policy exerts depreciation pressure on RMB, but if combined with strong fiscal stimulus stabilizing the economy, RMB will be supported in the long run. The PBOC’s management of the RMB midpoint also plays a “guiding” role.

Is Investing in RMB-Related Currency Pairs Profitable Now?

The answer is yes, if you seize the right timing.

In the short term, RMB is expected to remain relatively strong, fluctuating within a limited range with inverse movement to the USD. The probability of a rapid appreciation below 7.0 before the end of 2025 is low, but the long-term upward trend is established.

Main channels for investing in RMB-related currency pairs include:

Bank Foreign Exchange Accounts
Open foreign exchange accounts through local commercial banks or international banks for trading.

Forex Margin Platforms
Many forex brokers allow investors to take both long and short positions, meaning profit opportunities exist whether RMB appreciates or depreciates. Most platforms support leverage trading, enabling traders to gain exposure exceeding their initial capital. Mitrade, XTB, Admirals, and others are reputable options, offering small investment sizes from 0.01 lots, flexible leverage from 1-200x, and risk management tools like stop-loss and take-profit.

Securities Firms and Futures Exchanges
Some securities firms provide forex trading services, and futures exchanges offer forex futures trading channels.

Four Dimensions to Judge RMB’s Future Trend

Avoid relying solely on one forecast; instead, learn to analyze from these dimensions:

1. China’s Monetary Policy Orientation
Central bank’s rate cuts and reserve requirement ratio reductions (easing measures) usually exert depreciation pressure on RMB; rate hikes and reserve ratio increases support appreciation. For example, in 2014, the PBOC cut rates six times consecutively, and USD/RMB rose from 6 to nearly 7.4, illustrating policy effects.

2. Domestic Economic Data Performance
Stronger GDP growth, PMI, CPI, fixed asset investment data attract foreign capital inflows, supporting RMB appreciation. Conversely, weak data exert depreciation pressure.

3. USD Index and Fed Movements
The Fed’s policy is the main driver of USD trends, which in turn influence USD/RMB. For instance, in 2017, the Eurozone’s better-than-expected recovery and ECB signals to tighten led to a 15% decline in the USD index for the year, and RMB also depreciated during the same period.

4. Central Bank’s Exchange Rate Guidance
Since 2017, the RMB has incorporated an “inverse cycle factor,” strengthening official guidance on the exchange rate. While this influences short-term movements, the medium- and long-term trend remains dominated by the overall monetary market direction.

Summary

As China enters a loose monetary policy cycle, USD/RMB shows a clear trend. Historically, such cycles can last up to ten years, with short- and medium-term fluctuations driven by USD movements and international events. By mastering the above influencing factors, investors can significantly improve their profit chances. The forex market is driven by macro factors, with transparent data, large trading volumes, and support for two-way trading, making it relatively fair and advantageous for investors.