I just noticed an interesting phenomenon: the trend of the RMB exchange rate over the past two years has indeed been undergoing a deep-seated shift.

Looking back, since the start of the depreciation cycle in 2022, the RMB against the US dollar has been under pressure for three consecutive years, once depreciating to above 7.4. But after entering 2025, the situation began to change. Although there was some volatility in the first half of the year, a clear rebound started in the second half, and by the end of November, the RMB even broke through 7.08, hitting a nearly one-year high. Now, by mid-2026, the market generally believes that the previous depreciation cycle has ended, and the RMB is beginning a new round of medium- to long-term appreciation.

Why is this happening? Several core logics are worth noting. First, China's export resilience is still intact, providing fundamental support for the RMB. Second, foreign capital is reconfiguring RMB assets, and this trend is gradually establishing. Third, the structural weakness of the US dollar index is a major background factor.

International investment banks also have fairly consistent expectations for RMB appreciation. Deutsche Bank predicts the USD to RMB exchange rate will rise to around 7.0, further strengthening to 6.7 by the end of 2026. Morgan Stanley judges that by the end of 2026, the US dollar index may fall back to 89, which could correspond to an RMB/USD exchange rate reaching 7.05. Goldman Sachs' logic is even more interesting; they believe the real effective exchange rate of the RMB is undervalued by 12%, with the undervaluation against the dollar reaching 15%. Based on this judgment, the RMB against the dollar could appreciate to 7.0 within the next 12 months.

However, it’s important to clarify that predicting the RMB/USD exchange rate trend is not simply a one-way upward movement; there are many uncertainties in between. The pace of Fed rate cuts, progress in US-China trade negotiations, and the People's Bank of China's policy orientation—all these factors will influence short-term fluctuations. Especially the US dollar index, which experienced a cumulative 9% plunge in the first five months of 2025, marking the worst start of the year, but whether it can continue to weaken depends on the Fed's actions.

From an investment perspective, RMB-related currency pairs do have opportunities in the current environment. The key is to grasp the timing and rhythm. In the short term, the RMB is expected to remain relatively strong, but the possibility of a rapid appreciation below 7.0 is not very high. In this environment, understanding the key factors influencing the exchange rate is very important.

First is the central bank's monetary policy. Loose policies usually exert depreciation pressure on the domestic currency, but if such easing is combined with strong fiscal stimulus that stabilizes the economy, it can ultimately support the RMB in the long run. Second are economic data indicators like GDP growth, PMI, and CPI, which reflect economic health and directly influence foreign capital inflows. Third is the US dollar trend. This is the most direct factor; the strength or weakness of the dollar largely determines the direction of USD/RMB exchange rate forecasts. Fourth is the official guidance on the exchange rate. The setting of the RMB midpoint has become increasingly significant as a "benchmark."

Overall, we are currently at an interesting turning point. With China's monetary policy continuing to ease and the structural weakness of the dollar becoming more evident, the RMB appreciation cycle could last for quite a long time. Similar historical cycles can last up to ten years, with short-term fluctuations in between, but the overall trend should be gradually strengthening. For investors, understanding these macro factors and keeping an eye on policy and data changes will help better participate in this process.