I’ve been paying close attention to this wave of the renminbi market lately. To be honest, the exchange-rate trend over the past two years really has been quite interesting. From the depreciation cycle that started in 2022 to now, the renminbi has gone through a rather winding process, but the performance over the past few months has led many investors to reexamine this asset.

Looking back at the period from late 2024 to the beginning of this year, the renminbi’s appreciation trend against the US dollar has become increasingly obvious. Everyone saw the move in November last year: the renminbi briefly rose to below 7.08 and even touched 7.0765, which was its strongest performance in nearly a year. Why did this happen? It was mainly driven by factors such as the easing of China-US trade relations and rising expectations that the Federal Reserve would cut interest rates.

When it comes to exchange-rate forecasts, I think you first need to understand the “temperament” of the renminbi over these past few years. During the COVID-19 period in 2020, the renminbi was still around 6.3. At that time, China’s economy recovered first; the Federal Reserve cut rates to zero, the interest-rate differential widened, and the renminbi moved particularly strongly. But everything reversed in 2022: the Fed launched aggressive rate hikes, the US dollar index surged, and the renminbi slid from 6.35 to 7.25. That year’s decline was as high as 8%, the largest drop in recent years. From 2023 to 2024, although the renminbi still hovered above 7, the overall trend has been improving.

The question in front of us now is: can the renminbi still rise? My observation is that many international banks have offered optimistic forecasts. Deutsche Bank believes the renminbi could start a long-term appreciation cycle, estimating that it could rise to 7.0 by the end of this year and further to 6.7 by the end of next year. Morgan Stanley also favors a moderate appreciation of the renminbi, expecting the US dollar index to continue weakening, with a chance to fall to 89 by the end of 2026—corresponding to the renminbi-to-US-dollar rate reaching around 7.05. Goldman Sachs’ logic is even more interesting: they found that the renminbi’s real effective exchange rate is undervalued by 12%, and the undervaluation versus the US dollar is even deeper, reaching 15%. Based on this assessment, Goldman Sachs predicts that over the next 12 months the renminbi can appreciate to 7.0.

Why do these institutions all look favorably on the renminbi? There are three core reasons. First, China’s exports still have resilience—this is the basic pillar supporting the renminbi. Second, foreign capital is reallocating into renminbi assets, and this trend is becoming increasingly clear. Third, the US dollar index is structurally weakening, which gives the renminbi some breathing room.

But to truly judge the exchange-rate outlook, I think you need to focus on several key variables. As for the US dollar index, in the first five months of this year it has cumulatively fallen by 9%, the worst start in history. If the Federal Reserve continues to cut rates, the dollar will still have room to move downward, and Asian currencies—including the renminbi—are likely to rise along with it. Progress in China-US negotiations is also crucial: once tariff concerns heat up again, depreciation pressure on the renminbi will return. The Federal Reserve’s policy cadence, the People’s Bank of China’s monetary policy orientation, and the degree of renminbi internationalization—all of these directly affect the accuracy of exchange-rate forecasts.

From the central bank’s perspective, the renminbi’s midpoint rate against the US dollar has always been playing the role of a “price-setting anchor.” The 2017 reform added a countercyclical factor and strengthened official guidance on the exchange rate. This means that short-term exchange-rate fluctuations are heavily influenced by policy, but over the medium to long term, it still depends on the overall direction of the market.

China’s economic data also cannot be ignored. Indicators such as GDP, PMI, and CPI reflect the health of the economy and directly affect foreign investors’ willingness to come in. When the economy performs better than other emerging markets, foreign capital will keep pouring in, naturally increasing demand for the renminbi. Conversely, it works the other way around.

Speaking of investment opportunities, there really is room. In the short term, the renminbi is expected to remain relatively strong, and overall it will likely show a range-bound pattern of fluctuations that move inversely to the US dollar, with limited amplitude. Many investors conduct margin trading through foreign-exchange brokers—this allows them to go long or short, and leverage can be used to amplify returns. Of course, leverage is a double-edged sword, and risks will also be magnified, so you need to set it according to your own risk tolerance.

All in all, the renminbi’s depreciation cycle that began in 2022 may have largely come to an end, and a new appreciation track is taking shape. Even though there will still be fluctuations in the meantime—since the dollar’s direction, policy adjustments, and international developments could all bring uncertainties—the overall trend is upward. For investors who want to participate in this round of opportunities, the key is to grasp the factors mentioned above: don’t blindly chase the highs, and don’t be scared off by short-term volatility. In the foreign exchange market, macro factors are the main drivers; data from different countries is publicly available, and trading volume is large, making it relatively fair for retail traders. As long as your strategy is sound, there are still opportunities to profit from the renminbi’s appreciation.