Just saw an analysis on the RMB exchange rate and remembered a friend has been asking whether it's still possible to invest in RMB-related currency pairs. To be honest, the answer to that question isn't so simple.

A review of the past year’s trend can give some clues. From early 2025 to now, the USD to RMB has experienced quite a bit of fluctuation. In the first half of the year, it depreciated to below 7.4, hitting a new low since 2015. But in the second half, the situation reversed. As China-U.S. relations eased and the dollar index weakened, the RMB started to rebound. By November last year, the RMB appreciated against the dollar to below 7.08, even touching 7.0765, reaching a nearly one-year high.

Looking at a longer time frame, there’s an interesting cycle behind this. During the pandemic, the RMB appreciated sharply, reaching around 6.5 at the end of 2020. But starting in 2022, the Federal Reserve’s aggressive rate hikes pushed the dollar higher, while the domestic economy faced pressure, leading the RMB into a depreciation cycle. Currently, this depreciation cycle may be coming to an end.

Several international investment banks are optimistic about the future trend. Deutsche Bank expects the RMB to appreciate against the dollar to around 6.7 by the end of 2026, while Morgan Stanley predicts it could reach about 7.05 by then. Goldman Sachs has a more aggressive outlook, believing that the RMB is currently undervalued by 12% relative to its ten-year average, with room for rapid appreciation.

But here’s a key issue: in the short term, the RMB’s appreciation potential is limited. Although the medium to long-term outlook is positive, the probability of breaking below 7.0 quickly before the end of 2026 isn’t high. It mainly depends on three variables—the direction of the dollar index, signals from the central bank’s policies, and the strength of growth stabilization policies.

From the dollar’s perspective, the dollar index has already fallen 9% in the first five months of 2025, marking the worst start to the year. If the Federal Reserve truly begins a rate cut cycle, the dollar could continue to weaken, which would benefit Asian currencies including the RMB. However, uncertainties around US-China tariff negotiations still exist, and that remains a key variable affecting the exchange rate.

Interestingly, the RMB exchange rate isn’t determined solely by market forces. The central bank influences it significantly through the midpoint rate quotes and counter-cyclical factors. For example, in 2014, when the central bank cut interest rates six times consecutively and reduced reserve requirements sharply, the USD to RMB rose from 6 to 7.4, demonstrating policy’s power.

Regarding investing in RMB-related currency pairs, my view is: the long-term logic is sound, but patience is needed in the short term. China’s export resilience remains, and the trend of foreign capital reallocating into RMB assets is also establishing itself—these are supportive factors. But if you want to operate, you need to closely monitor the central bank’s policy signals and the specific movements of the dollar index.

By the way, recently many people have also asked about the CAD to RMB trend. Compared to the RMB, the Canadian dollar is more closely linked to commodities, so the logic of its movement is somewhat different. The CAD to RMB rate is mainly influenced by oil prices and Canadian monetary policy. However, from a forecast perspective, if the dollar continues to weaken, the CAD could also benefit.

Overall, the foreign exchange market is mainly influenced by macro factors. Data from various countries is transparent and publicly available, trading volume is sufficient, and the market is relatively fair for investors. As long as you grasp the key factors affecting exchange rates—central bank policies, economic data, dollar trends, and international trade environment—you can significantly improve your judgment accuracy.