I’ve just noticed that recent discussions about the RMB exchange rate have been getting increasingly heated lately—especially the topic of forecasts for the USD-to-RMB exchange rate. Many institutions are re-evaluating the RMB’s long-term outlook.

Looking back at this year, after experiencing a depreciation cycle in the past few years, the RMB has shown clear rebound signs starting from the beginning of the year. In the first half of the year, it still fluctuated between 7.1 and 7.3, but entering the second half, as China-U.S. trade negotiations advanced, the RMB began to appreciate faster—at one point even breaking below 7.08. This shift is quite interesting because it breaks the market’s previous expectation of continued RMB depreciation.

From a historical perspective, the RMB saw strong appreciation during the 2020 to 2021 period. At that time, the USD-to-RMB exchange rate once fell to around 6.35. However, after the Federal Reserve’s aggressive rate hikes in 2022, the RMB entered a depreciation cycle lasting for three years, and in 2023 it even fell above 7.1. Now it seems that this depreciation cycle may really be coming to an end.

Several major investment banks’ recent forecasts have been fairly optimistic. Deutsche Bank believes the RMB is starting a new round of long-term appreciation, expecting it to rise to 7.0 by the end of this year and further reach 6.7 by the end of next year. Morgan Stanley also favors moderate RMB appreciation, predicting that the U.S. dollar index will fall back to around 89, which would correspond to an RMB-to-USD exchange rate of 7.05. Goldman Sachs is more aggressive: they think the RMB is currently undervalued by 12 to 15%, and that within the next 12 months it has a chance to appreciate to 7.0.

There are actually three core factors supporting RMB appreciation. First, China’s export resilience remains strong, which provides fundamental support for the RMB. Second, as the Federal Reserve’s rate-cut cycle progresses, the U.S. dollar index is likely to keep weakening, which is favorable for the RMB. Third, foreign capital is re-allocating into RMB assets, and this trend is gradually taking shape.

But to judge whether forecasts for the USD-to-RMB exchange rate are accurate, you still need to look at several key variables. The Federal Reserve’s monetary policy is the primary factor: if inflation does not fall sufficiently, the Fed may slow down its pace of rate cuts, which would support the dollar. China-U.S. trade relations are also crucial—progress in negotiations directly affects market sentiment. There is also the central bank’s policy orientation: if the People’s Bank of China continues its loosening stance and releases liquidity, it will put short-term pressure on the RMB; but if it is paired with strong fiscal stimulus to stabilize the economy, the long-term outlook is still favorable for the RMB.

From an investment perspective, if you want to participate in opportunities for RMB appreciation, there are several ways. A traditional approach is to open a foreign exchange account through a bank, but the process is relatively slow. A more flexible option is to trade through foreign exchange broker platforms; these platforms typically offer 24-hour trading, two-way trading, and leverage tools, which are generally more friendly for retail investors. The key is to choose a legitimate, properly regulated platform, with comprehensive risk management tools—such as take-profit and stop-loss, as well as features like trailing stops.

In my view, this is indeed a good time to pay attention to the RMB. While forecasts for the USD-to-RMB exchange rate involve uncertainty, the overall direction of RMB appreciation should hold in the medium term. Short-term volatility is definitely still likely, so the key is to flexibly adjust your strategy based on factors such as Federal Reserve policy and the progress of China-U.S. trade talks. If you have experience with foreign exchange investing, you may consider taking part in related trades during this cycle.