Recently, I looked at some analyses of the RMB exchange rate trend and found this topic quite interesting. The performance of the RMB against the US dollar in 2025 indeed surprised many people, from the continuous depreciation pressure at the beginning of the year to appreciating below 7.08 by the end of the year. This turning point is worth a thorough study.

Looking back over the past few years, the RMB appreciated strongly in 2020, then experienced a sharp depreciation in 2022, marking the largest decline in recent years, and recently rebounded. This fluctuation in the USD to RMB exchange rate truly reflects a major global economic adjustment. Especially in the second half of this year, as US-China trade negotiations eased, the US dollar index also began to weaken, allowing the RMB to gradually reverse its downward trend.

The current question is, how far can this round of appreciation go? I’ve noticed that many international investment banks have given relatively optimistic forecasts. Deutsche Bank believes the RMB may be entering a long-term appreciation cycle, estimating it could reach 7.0 by the end of 2025 and further appreciate to 6.7 by the end of 2026. Morgan Stanley’s view is similar, expecting the US dollar index to fall back to 89 by 2026, which could correspond to an RMB/USD exchange rate reaching 7.05. Goldman Sachs even straightforwardly states that the point at which the RMB breaks below 7 might come faster than the market expects.

The key is to understand the core factors influencing the USD to RMB exchange rate. First is the US dollar index itself; in the first five months of this year, the dollar index fell by 9%, which naturally supported the RMB. Second is the progress of US-China trade negotiations; this variable remains crucial. Third is the Federal Reserve’s pace of interest rate cuts; if rate cuts accelerate, the dollar will weaken further. Lastly, don’t forget the attitude of the People’s Bank of China; although it may maintain a loose monetary policy to support the economy, if economic stabilization occurs, it will still be favorable for the RMB in the long term.

Historically, predicting the RMB exchange rate trend isn’t very difficult, mainly focusing on a few aspects. One is China’s monetary policy stance; rate cuts and reserve requirement ratio reductions usually put pressure on the RMB, but if combined with strong fiscal stimulus to stabilize the economy, it remains beneficial in the long run. Two is China’s economic data performance; indicators like GDP, PMI, and CPI influence foreign capital inflows. Three is the USD’s own trend, which is the most direct factor. Four is the signals from official guidance on the exchange rate; although the RMB isn’t fully floating freely, the PBOC’s midpoint rate adjustments still send strong signals.

For those looking to invest in RMB-related currency pairs, now is actually a good time. In the short term, the RMB is expected to remain relatively strong. While a rapid appreciation below 7.0 isn’t very likely, the overall direction of USD to RMB forecasts should be gradually strengthening. Instead of waiting for the perfect moment, it’s better to stagger your positions now, especially if you are optimistic about China’s economic recovery supported by steady growth policies.

The advantage of the forex market is that it allows for two-way trading; whether bullish or bearish, there are opportunities to profit. Many platforms now support leverage trading, which can amplify gains but also requires careful risk management. The key is to have a clear trading plan, set stop-loss and take-profit levels, and adjust leverage according to your risk tolerance.

Overall, as China enters a loose monetary policy cycle, such exchange rate cycles may last quite a long time. As long as you grasp the key factors influencing the RMB’s trend, investors can greatly improve their chances of profiting in the forex market. After all, the forex market is transparent and highly liquid, making it relatively fair for ordinary investors.