Recently, there’s been an interesting phenomenon; the trend of the RMB exchange rate is really worth paying attention to. 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 remains 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 and 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, reaching as low as 7.0765, the strongest performance in nearly a year.

From a longer-term perspective, this five-year exchange rate cycle has been quite regular. During the pandemic in 2020, the RMB appreciated strongly; in 2021, it remained relatively strong. However, in 2022, aggressive Federal Reserve rate hikes broke this pattern, with the RMB depreciating to its highest level in recent years. Although the USD retreated somewhat in 2023 and 2024, the RMB has remained above 7. Now it looks like this depreciation cycle might 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 to RMB will further rise to 7.0, and possibly fall to 6.7 by the end of 2026. Morgan Stanley also expects the RMB to appreciate mildly, with the dollar index possibly returning to around 89. Goldman Sachs is more aggressive, raising their 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’s undervalued by 15%.

The logic behind this is 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 exchange rate trend, we still need to keep an eye on several key variables: the Fed’s pace of rate cuts, progress in China-US trade negotiations, the People’s Bank of China’s policy signals, and China’s 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.

In terms of USD to RMB exchange rate forecasts, the key is how these factors evolve. In the short term, the RMB may remain relatively strong, 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 appreciation cycle. This turning point might really be here, and it’s worth ongoing observation.