A recent interesting phenomenon, the trend of the RMB exchange rate this wave really deserves attention. From last year to this year, the performance of the US dollar against the RMB has shown a clear shift, and the previous three-year depreciation trend seems to be reversing.

Speaking of which, the performance of the RMB in 2025 is still quite resilient. In the first half of the year, it was indeed pressured by tariffs and a strengthening dollar, with offshore RMB once falling below 7.4, even hitting a new low since 2015. But in the second half of the year, as China-US relations eased and the dollar index weakened, the RMB began to rebound. By mid-November, the USD against the RMB had fallen below 7.08, once touching 7.0765, the strongest performance in nearly a year.

From a longer time horizon, this five-year exchange rate cycle is quite regular. During the COVID-19 pandemic in 2020, the RMB appreciated strongly, maintaining relative strength in 2021, but in 2022, aggressive rate hikes by the Federal Reserve broke this pattern, with the RMB depreciating to its highest level in recent years. Although the USD retreated somewhat in 2023-2024, the RMB has remained above 7. Now it seems this depreciation cycle may really be coming to an end.

Major institutions in the market generally have a positive outlook on the RMB's future trend. Deutsche Bank predicts the USD against the RMB will further rise to 7.0, and possibly fall to 6.7 by the end of 2026. Morgan Stanley also believes the RMB will appreciate moderately, with the dollar index possibly returning to around 89. Goldman Sachs is more aggressive, directly raising the 12-month forecast from 7.35 to 7.0, citing that the real effective exchange rate of the RMB is undervalued by 12%, and against the dollar, it is undervalued by 15%.

The logic behind this is actually quite clear. First, China’s export resilience remains; second, foreign capital is beginning to reallocate RMB assets; third, the structural weakness of the dollar may persist. However, to truly judge the direction of the exchange rate, several key variables must be closely monitored: the Fed’s pace of interest rate cuts, progress in China-US trade negotiations, the People's Bank of China’s policy signals, and China’s own economic data.

From the perspective of central bank policies, loose monetary policy generally puts pressure on the RMB, but if combined with strong fiscal stimulus to stabilize the economy, it can be beneficial in the long run. The Fed’s rate cut cycle has just begun; if it accelerates, the dollar will continue to weaken, which is favorable for the RMB. The direction of China-US trade relations is also crucial; continued easing will support the RMB, while renewed tensions could bring depreciation pressure.

From the perspective of USD against RMB exchange rate forecasts, the key is how these factors evolve. In the short term, the RMB may maintain a relatively strong stance, but the probability of quickly breaking below 7.0 is not high. In the medium to long term, if these supporting factors persist, the RMB indeed has the chance to initiate a new round of appreciation. This turning point may really have arrived, and it is worth continuous observation.