RMB Exchange Rate Trends 2026 Forecast: Has the Appreciation Cycle Started or Is It a Trap?

The Truth Behind the Sudden Turn in the Renminbi Exchange Rate

Since 2025, the renminbi exchange rate has experienced a rollercoaster ride. At the beginning of the year, USD to RMB fluctuated violently within the range of 7.04 to 7.3. During the first half of the year, it briefly fell below the 7.40 mark, hitting a new low since the 2015 exchange rate reform; but in the second half, the situation suddenly reversed— the renminbi began a strong rebound, breaking through 7.05 on December 15, and recently reaching a new high of 7.0404, the highest in nearly 14 months.

The offshore renminbi (CNH) performed even more volatile, oscillating between 7.02 and 7.4, reflecting international capital's sensitive response to the renminbi outlook. What market logic lies behind this rapid shift?

From "Annual Depreciation" to "New Round of Appreciation"—A Turning Point in the Renminbi Exchange Rate

To understand the current trend of the renminbi exchange rate, it is necessary to review the bleak performance over the past three years. From 2022 to 2024, the renminbi depreciated against the US dollar consecutively, with USD to RMB rising from a high of 6.35 to over 7.25, with an annual depreciation of 8%, marking the largest decline in recent years.

But 2025 saw a turning point. The renminbi appreciated approximately 3% over the year, signaling the end of the depreciation cycle. Many international investment banks generally believe that the renminbi exchange rate is at a cyclical turning point, and a medium- to long-term appreciation wave has already begun.

What is Driving the Reversal in the Renminbi Exchange Rate?

US-China Trade Tensions Easing

At the start of the year, trade risks pushed the renminbi to the brink. The dual pressures of global tariff policy uncertainty and a persistently strong US dollar index caused the renminbi to come under pressure. However, as China-US economic and trade negotiations steadily advanced, both sides recently reached a new consensus in Kuala Lumpur— the US will reduce tariffs on Chinese goods related to fentanyl from 20% to 10%, and suspend the 24% additional tariffs until November 2026.

Although this ceasefire agreement carries risks of reversal (a similar agreement in May this year quickly fell apart), the positive signals currently released are enough to support the short-term strength of the renminbi exchange rate.

US Dollar Index Loses Upward Momentum

In the first half of 2025, the US dollar index fell from 109 at the start of the year to 98, a decline of nearly 10%, the weakest first half performance since the 1970s. Although there was a rebound in the second half, driven by the Federal Reserve’s rate cut in December, the dollar index fell back into the 97.8-98.5 range.

This is a key point: a weakening dollar directly boosts the renminbi exchange rate. When the dollar is no longer the safe haven darling, the relative attractiveness of the renminbi increases.

Renminbi’s Real Purchasing Power Is Undervalued

Goldman Sachs’s analysis hits the mark— currently, the real effective exchange rate of the renminbi is undervalued by 12% compared to the ten-year average, with an undervaluation of 15% against the dollar. In other words, the upside potential of the renminbi exchange rate is seriously underestimated by the market. Goldman Sachs expects the USD to RMB rate to rise to 7.0 within the next 12 months, and further strengthen in 2026.

Renminbi Exchange Rate Forecast for 2026: What Do Three Major Investment Banks Say?

Deutsche Bank provides a clear forecast: the USD to RMB exchange rate will rise to 7.0 by the end of 2025, and further to 6.7 by the end of 2026. This implies an appreciation of up to 4.4% within one year.

Kamakshya Trivedi, Head of Global FX Strategy at Goldman Sachs, states that the moment when the renminbi "breaks 7" (i.e., surpasses 7.0) may come sooner than the market expects. The logic is straightforward: strong Chinese export performance will support the renminbi, and the Chinese government prefers to use fiscal policy rather than currency devaluation to stimulate the economy.

Four Long-Term Factors Influencing the Renminbi Exchange Rate

Investors should not only focus on short-term fluctuations but also understand the deeper drivers to grasp the medium- and long-term rhythm of the renminbi exchange rate.

1. Federal Reserve Monetary Policy Direction
The Fed’s rate hikes or cuts directly influence the strength of the dollar. If inflation remains high, the Fed may maintain high interest rates to support the dollar; if the economy slows, rate cuts will weaken the dollar. The renminbi and the dollar index usually move inversely.

2. People's Bank of China’s Easing Cycle
China’s central bank tends to maintain an easing monetary policy to support economic recovery. Rate cuts or reserve requirement ratio reductions may exert short-term downward pressure on the renminbi, but if combined with strong fiscal stimulus stabilizing the economy, it will boost the renminbi’s long-term trend.

3. China's Economic Data Performance
When China’s GDP growth is stable, PMI improves, exports remain resilient, and other economic indicators are positive, foreign capital inflows increase, boosting demand for the renminbi and strengthening the exchange rate. Conversely, the opposite applies.

4. Official Guidance on the Renminbi Exchange Rate
Unlike fully floating currencies, the renminbi’s midpoint fixing mechanism incorporates a "counter-cyclical factor," giving the central bank influence over short-term exchange rate movements. The long-term trend still depends on market direction, but official regulation can mitigate market behavior aligned with the cycle.

A 5-Year Review of the Renminbi Exchange Rate: From Appreciation to Depreciation and Back

2020: During the early pandemic, the renminbi briefly depreciated to 7.18, but as China led the way in controlling the pandemic and economic recovery accelerated, coupled with the Fed’s near-zero interest rates, the renminbi rebounded strongly to 6.50 by year-end, appreciating 6%.

2021: China’s exports remained strong, the central bank maintained a prudent policy, and the dollar index stayed low. The renminbi fluctuated narrowly between 6.35 and 6.58, maintaining relative strength throughout the year.

2022: The Fed’s aggressive rate hikes pushed the dollar index higher, while China’s strict pandemic policies hampered the economy, and a real estate crisis worsened. The renminbi depreciated 8% for the year, the largest decline in recent years, with USD to RMB rising above 7.25.

2023: Economic recovery fell short of expectations, the real estate debt crisis persisted, and high US interest rates continued. The renminbi fluctuated between 6.83 and 7.35, ending the year slightly stronger at around 7.1.

2024: The weakening dollar and Chinese fiscal stimulus supported the renminbi, which broke through 7.10 to reach a half-year high, with increased volatility throughout the year.

Can You Buy Renminbi Now? How Should Investors Decide?

Based on the current trend, the renminbi is expected to remain relatively strong in the short term, generally moving inversely to the dollar within a limited range. A rapid appreciation into the 7.0 range before the end of 2025 is less likely, so don’t expect to "buy low and sell high" immediately.

The key is to monitor these three points:

• US Dollar Index Trend: If the dollar strengthens again, the renminbi may face downward pressure.
• Central Bank’s Midpoint Fixing Signals: The PBOC’s policy stance is often reflected in the midpoint adjustments.
• China’s Growth Stabilization Policies: The pace of fiscal stimulus influences foreign investor confidence.

How to Predict the Renminbi Exchange Rate: Four Dimensions Every Investor Must Read

Track the People’s Bank of China’s policy moves

Monetary policy tightening or loosening directly impacts money supply. Easing cycles tend to put downward pressure on the renminbi, but if combined with economic stabilization, they can support the currency long-term. Monitoring changes in benchmark lending rates and reserve requirement ratios can help anticipate the renminbi’s direction.

Watch China’s Economic Data

Quarterly GDP releases, monthly PMI reports, CPI inflation levels, urban fixed asset investment, etc., directly reflect economic attractiveness. When these indicators improve, foreign capital inflows increase, boosting demand for the renminbi and strengthening the exchange rate.

Study the USD Index and Fed Policy

The dollar’s trend is highly correlated with the renminbi. Tracking Fed meeting minutes, rate decisions, and economic forecasts can help pre-judge the dollar’s direction, thereby inferring the renminbi’s future trend.

Interpret Official Exchange Rate Guidance Signals

The setting of the renminbi’s midpoint is not purely market-driven; it contains official policy inclinations. Observing the magnitude and direction of midpoint adjustments can reveal the central bank’s attitude toward the renminbi’s trend.

Why Is Offshore Renminbi (CNH) More Volatile?

Since CNH is traded in international markets like Hong Kong and Singapore without capital controls, it is more freely traded, and thus CNH tends to be more volatile than onshore RMB (CNY), reflecting global market sentiment more sensitively.

In 2025, CNH/USD also experienced dramatic swings— early in the year, due to US tariff policies, it fell below 7.36; the People’s Bank of China issued 60 billion yuan of offshore bills to stabilize the market; but recently, with easing US-China negotiations and rising rate cut expectations, CNH has strengthened significantly, breaking through 7.05 on December 15, rebounding over 4% from the year's high, reaching a 13-month high.

Summary: The Long-Term Logic of the Renminbi Exchange Rate

As China enters a monetary easing cycle, the trend of USD to RMB has shown a clear directional change. Based on historical experience, similar policy cycles can last up to ten years. Although there will be short- and medium-term fluctuations due to dollar volatility and unexpected events, the overall direction is set—the renminbi exchange rate is entering a new appreciation cycle.

The factors influencing the forex market mainly stem from macro fundamentals. Economic data released by various countries is transparent and open, market trading volume is large, allowing for two-way trading, making it more equitable for ordinary investors compared to other markets. By grasping the core factors affecting the renminbi exchange rate and analyzing market logic rationally, investors can greatly improve their chances of success.