I have been paying close attention to the trend of the RMB exchange rate recently and have noticed some quite interesting changes I’d like to share with everyone.

The performance of the RMB against the US dollar over the past six months is indeed worth noting. From the trend perspective, the USD to RMB has been fluctuating between 7.1 and 7.3 repeatedly, with only small swings, but compared to the continuous depreciation trend over the previous three years, this already signals a clear turning point. Especially in recent months, as China-US trade relations improve and expectations of Fed rate cuts rise, the RMB has shown obvious signs of appreciation, once breaking through the 7.08 level and even touching 7.0765, hitting a nearly one-year high.

Looking back at the first half of this year, the situation was quite turbulent. Uncertainty in global tariff policies and the persistent strength of the US dollar index once pushed offshore RMB below 7.40, when market expectations for RMB depreciation were quite strong. However, after entering the second half, the situation gradually reversed. China-US trade negotiations advanced steadily, and the US dollar index began to weaken, making the forecast for RMB exchange rate movements clearer.

Currently, the market generally believes that the depreciation cycle starting in 2022 may have come to an end. The views of international investment banks are also quite consistent. Deutsche Bank analysts believe that the RMB is beginning a long-term appreciation cycle, with a chance to reach 6.7 by the end of 2026. Morgan Stanley expects the US dollar index to weaken further, possibly falling back to 89 by year-end, corresponding to an RMB to USD rate around 7.05. Goldman Sachs has a more aggressive view, believing that the RMB’s real effective exchange rate is undervalued, with a more apparent undervaluation relative to the dollar. Based on this, they expect the RMB to USD exchange rate could rise to 7.0 within 12 months.

There are three main factors supporting RMB appreciation. First, China’s exports continue to show resilience, providing fundamental support for the RMB. Second, the trend of foreign capital reallocating into RMB assets is gradually establishing, indicating that international investors’ confidence in the RMB is recovering. Third, the US dollar index maintains a structurally weak pattern, fundamentally weakening the dollar’s relative advantage.

However, it’s important to clarify that future USD exchange rate forecasts still depend on several key variables. The most direct influence is the fluctuation of the US dollar index, which in early 2025 plummeted 9%, marking the worst start to a year on record, reflecting market concerns about the dollar’s outlook. Next is the progress of China-US trade negotiations, which directly determines whether tariff policy uncertainties can be eliminated. The pace of Fed rate cuts is also crucial; if inflation remains higher than expected, rate cuts may slow down, which would support the dollar.

From China’s internal perspective, the People’s Bank of China’s policy stance is also worth noting. Currently, monetary policy tends to stay accommodative to support economic recovery, which usually puts short-term pressure on the RMB. But if combined with stronger fiscal stimulus, it could boost the RMB in the long run.

For investing in RMB-related currency pairs, timing is indeed key. In the short term, the RMB is expected to remain relatively strong, but the possibility of rapid appreciation below 7.0 is not very high. To seize this opportunity, close attention should be paid to China’s economic data, central bank policy signals, and real-time movements of the US dollar index.

Generally, we can judge the RMB exchange rate trend through several dimensions. First, look at the central bank’s monetary policy; rate cuts or reserve requirement reductions usually exert depreciation pressure on the RMB, and vice versa. Second, monitor China’s economic data—GDP, PMI, CPI—these indicators reflect economic health and directly influence foreign capital inflows. Third, observe the USD trend itself; policies from the Federal Reserve and the European Central Bank have the greatest impact on the dollar’s direction. Lastly, pay attention to the official stance on the exchange rate; the People’s Bank of China’s mid-price quoting mechanism still plays a guiding role in the short-term exchange rate.

Historically, policy-driven cycles like this tend to last quite long. Although fluctuations occur due to various events, once the main direction is set, it’s hard to change. Currently, it seems the long-term cycle of RMB appreciation has begun. For investors, as long as these influencing factors are properly grasped, there are still many opportunities in the forex market.