I’ve been closely watching the recent wave of Renminbi (RMB) appreciation, and honestly, it’s been quite interesting. Since the end of last year, the RMB has finally reversed three consecutive years of depreciation, surging past the 7.0 psychological level in one move. This year, it has accelerated even further, and at one point it touched 6.81, setting a new high in nearly three years.

The logic behind this wave of RMB appreciation is actually quite clear. China’s export performance has indeed been very resilient. Last year’s full-year trade surplus reached a historical high of about $1.2 trillion, up 20% year on year. This figure already matches the GDP scale of one of the world’s top 20 economies. And in this year, the strong momentum has continued: first-quarter GDP grew 5.0% year over year, exceeding market expectations, and it has also reversed the low point at the end of last year.

In addition to economic fundamentals, foreign investors’ renewed allocation to RMB assets is also a driver. The huge trade surplus has boosted settlement demand, and along with a rebound in net cross-border capital inflows, market confidence in the RMB has clearly improved. Although the U.S. Dollar Index has also moved somewhat, the magnitude of RMB appreciation has been noticeably greater than the dollar’s decline. This suggests that the real driving force is coming primarily from China itself.

However, the central bank has recently moved to “cool down” the situation. In February, it lowered the foreign exchange risk reserve ratio, clearly signaling that it does not want the exchange rate to appreciate excessively on one side. In the short term, the pace of RMB appreciation may slow down somewhat. It is expected to trade in a range and consolidate between 6.83 and 6.92, and a modest pullback can’t be ruled out.

Big international banks remain relatively optimistic about the outlook. Goldman Sachs maintains a 12-month target price of 6.70, believing there is still about 22% of undervaluation room for the RMB. HSBC sets its year-end target at 6.75. But this doesn’t mean it will surge higher in a straight line—markets will still look at the Federal Reserve’s monetary policy, developments in China-U.S. relations, and seasonal factors.

From an investment perspective, I think positioning for the RMB now does have some thematic support—especially for investors who have long-term holding needs or want to hedge against USD risk. But in the short term, it definitely won’t “take off” overnight. A staged, incremental positioning strategy is more prudent. Closely monitoring the daily midpoint rates released by the central bank and subsequent trade data will be very helpful for judging the price trend.

When it comes to assessing the direction of RMB appreciation, there are basically a few core factors. First is the central bank’s monetary policy: when policy is loose, appreciation is more likely; when policy is tightened, weakness is more likely. Second is China’s economic data—things like GDP, PMI, and CPI all need to be watched. Next is the U.S. dollar trend, where Federal Reserve policy often plays a key role. Finally, don’t forget the official stance on the exchange rate. The RMB is not a freely convertible currency like some others, so the central bank’s guidance still remains quite evident.

Looking back at the past five years, RMB appreciation was clearly evident during the pandemic. From 2020 to 2022, the U.S. dollar to RMB exchange rate spent most of the time below 7. But after the pandemic, from 2023 to 2025, it moved on a depreciation track, only turning around until the second half of last year. How long this wave of RMB appreciation can last still depends on whether China can continue to release positive signals for its economy, and whether the U.S. dollar’s credibility can be restored. As long as these two conditions don’t change, there is a chance that the momentum for RMB appreciation can continue.

Offshore RMB fluctuations are typically larger than onshore RMB, because trading is freer and capital flows face fewer restrictions. As of early May this year, offshore RMB has been trading between 6.82 and 6.95, up more than 1,400 basis points compared with the beginning of the year, reaching a new high in nearly three years. This trend is definitely worth paying close attention to.