[Renminbi Exchange Rate Trend Outlook] Analysis of the USD to Renminbi Exchange Rate Trend in the Second Half of 2025

The Renminbi Welcomes a Wave of Appreciation, New Trends in the USD to CNY Exchange Rate

The renminbi has performed well this year. Since 2025, the exchange rate of the US dollar against the renminbi has fluctuated significantly, showing an overall trend of appreciation.

Check out the latest situation. At the beginning of October, the Exchange Rate of the US dollar against the Renminbi has returned to around 7.18, significantly lower than at the beginning of the year. There has been continuous good news in the third quarter. The China-US relationship has eased. The Federal Reserve has started to cut interest rates. All of these have provided support for the Renminbi. Data shows that the Exchange Rate has gradually declined from 7.22 in September, hitting a recent low.

Interestingly, the recent appreciation of the Renminbi seems to be closely linked to the weakness of the US dollar index. The US dollar index has performed weakly, benefiting Asian currencies generally. Both domestic and external demand in China are improving simultaneously, leading to a more optimistic market outlook on the Renminbi.

What will happen to the Renminbi next? Let's analyze it.

## Key Factors Affecting the Exchange Rate of the US Dollar to the Renminbi

Factors influencing the trend of the Renminbi can be viewed from two aspects:

- External: Changes in the US Dollar Index and international trade policies
- Internal: The balance between market expectations and policy guidance, the RMB central parity has always been the "benchmark star."

Let's analyze a few important factors in detail:

US Dollar Index: In the first three quarters of this year, the US dollar index has generally come under pressure. Most international institutions predict that the dollar will continue to weaken. The Federal Reserve has already started to cut interest rates, leading to a decline in short-term rates. Analysts believe that the dollar may continue to depreciate. From this perspective, the Renminbi and other Asian currencies should continue to appreciate. But who knows? The market can be quite capricious at times.

China-U.S. Negotiations: Both sides have recently released quite a few positive signals, but there are still uncertainties in the relationship. In the latest negotiations, both parties reached cooperation in multiple areas. The risk of trade friction seems to have decreased. If negotiations continue to proceed smoothly, it will be beneficial for the renminbi; conversely, depreciation pressure will increase.

Federal Reserve Policy: This is crucial for the US dollar. The Federal Reserve will begin to cut interest rates in 2025, but the extent and pace will depend on inflation data and the employment market. According to the latest meeting minutes, there will be another rate cut before the end of the year. The US dollar may further weaken. The Renminbi typically moves inversely to the US dollar.

Central Bank Policy: China's monetary policy is relatively loose, supporting economic growth. Domestic demand still needs to be boosted. The central bank may cut interest rates or lower the reserve requirement ratio to increase liquidity. Fortunately, the recovery of the Chinese economy provides a fundamental support for the Renminbi.

Internationalization of the Renminbi: The role of the Renminbi in global trade settlement is expanding. Currency swap agreements are also increasing. These are all long-term benefits. Data shows that the Renminbi's share in international payments has significantly increased, which is beneficial for the Exchange Rate in the long run.

## Future Trend Forecast of the Renminbi

Major international financial institutions have recently become optimistic about the Renminbi. Market data indicates that many institutions have raised their forecasts for China's economic growth and are also optimistic about the trend of Renminbi appreciation.

JPMorgan has significantly revised its expectations. They have raised the year-end exchange rate for the US dollar against the Chinese yuan from 7.35 to 7.0. They believe that the yuan may "break 7" earlier than most people think. The report points out that the actual effective exchange rate of the yuan is undervalued. Considering the progress of Sino-US negotiations, the yuan may gradually rise to 7.0 in the coming months.

Deutsche Bank is also optimistic. They believe that China's trade advantages will support the Renminbi, predicting that the exchange rate will reach 7.0 by the end of 2025 and may further strengthen to 6.7 by the end of 2026.

Other institutions also expect the Renminbi to gradually appreciate. Analysis generally believes that the US dollar will continue to depreciate this year. The reasons include: the weakening of the US dollar's safe-haven attribute, an increase in investors' demand for risk hedging of US dollar assets, and a more pronounced slowdown in the US economy.

## Ideas for Judging the Trend of the RMB Exchange Rate

Teaching a man to fish is better than giving him a fish. Regardless of how the market changes, we can judge the trend of the Renminbi from the following aspects:

### 1. Central Bank Monetary Policy

The policies of the People's Bank of China influence the money supply, thereby affecting the Exchange Rate. Loose policies (such as interest rate cuts and reserve requirement reductions) typically weaken the RMB; tightening policies (such as interest rate hikes and increases in reserve requirements) may strengthen the RMB.

Recently, the central bank's policy has been relatively loose to support economic recovery, which has put some pressure on the renminbi. However, with improvements in the economic fundamentals, this impact is weakening.

### 2. China Economic Data

Economic performance directly affects the Exchange Rate. When the economy is stable and growing, foreign investment increases, and the Renminbi strengthens; when the economy slows down, foreign investment decreases, and the Renminbi weakens.

Data worth noting includes:
- GDP: Released quarterly, reflecting the macroeconomic situation.
- PMI: Released monthly, the official version focuses on large enterprises, while the Caixin version emphasizes small and medium-sized enterprises.
- CPI: Released monthly, measures the inflation level
- Fixed Asset Investment: Published monthly, reflecting activities related to the construction and acquisition of fixed assets.

### 3. US Dollar Trend

The trend of the US dollar directly affects the exchange rate of the US dollar to the Renminbi. In 2025, the Federal Reserve will start to cut interest rates, leading to a weaker US dollar index. It is expected that there will be further rate cuts within the year, which may continue to push the US dollar down and support the Renminbi.

### 4. The official attitude towards Exchange Rate

The RMB exchange rate formation mechanism still has certain management characteristics. The central price quotation model is "closing price + a basket of currency exchange rate changes + counter-cyclical factor", and the authorities have a strong guiding ability over the exchange rate. This influence is evident in the short term, but in the medium to long term, it still depends on the market's overall direction.

## Can the Renminbi be bought now?

Investing in the Renminbi can be profitable. The key lies in seizing the opportunity.

- The US dollar against the Chinese yuan has recently fallen due to the weakening of the dollar and improvements in US-China relations, currently around 7.18. When the Exchange Rate is in the range of 7.15–7.2, technical indicators suggest there may be buying opportunities.

- On the news front, improvements in US-China negotiations or positive economic data from China may enhance buying signals; if there is an upgrade in tariffs, the Exchange Rate may rebound, so be mindful of the risks.

## How Can Taiwanese Investors Invest in Renminbi?

### Investment Method: Conduct foreign exchange transactions through banks

Taiwanese investors can open foreign exchange accounts at commercial banks or international banks to conduct foreign exchange trading and investment. The restriction is that only 20,000 RMB can be exchanged per day, which has low flexibility. However, for general investors, this is the most direct and safest investment method.