HKD to RMB Exchange Rate Trends Over the Past Decade and Outlook for 2026: Has the RMB Appreciation Cycle Started?

The Renminbi shifts from depreciation to appreciation, leading to a profound change in the exchange rate landscape

2025 is a critical turning point for the Renminbi’s exchange rate trend. The USD against the Renminbi has fluctuated bidirectionally within the 7.04 to 7.3 range throughout the year, and has recently broken through the 7.05 threshold, reaching a new high of 7.0404, the highest in nearly 14 months. This shift is highly significant—it marks the end of the three-year depreciation cycle of the Renminbi against the USD from 2022 to 2024.

Comparing the ten-year trend of the Hong Kong dollar to the Renminbi, we can see a clearer long-term context. Over the past decade, the relative stability between the Hong Kong dollar and the Renminbi reflects deep economic linkages between the two regions. Now, the expectation of Renminbi appreciation will directly influence the future direction of this exchange rate pair.

The offshore Renminbi (CNH) fluctuates within 7.02 to 7.40, reflecting international investors’ sensitivity to the Renminbi outlook. In mid-December, offshore Renminbi strengthened sharply, breaking through 7.05, rebounding over 4% from the early-year high, with market sentiment clearly turning optimistic.

Five core factors determining the future of the Renminbi

The forces driving the Renminbi exchange rate come from multiple dimensions. Understanding these factors is crucial for long-term allocation:

First, the US Dollar Index faces structural weakening

In the first half of the year, the USD Index declined from 109 to 98, a nearly 10% drop, marking the weakest half-year performance since the 1970s. In the second half, although there was a short-term rebound above 100, with the Federal Reserve beginning to cut interest rates, the USD Index bottomed at 97.869, reaffirming its weak trend. Generally, a weaker USD directly reduces depreciation pressure on the Renminbi, creating room for appreciation.

Second, signs of easing in US-China economic and trade relations

The latest round of US-China negotiations reached a new consensus in Kuala Lumpur—US tariffs on fentanyl were reduced from 20% to 10%, and the 24% ad valorem tariff component was suspended until November 2026. Both countries also agreed to delay export controls on rare earths and port fee measures, and to expand agricultural product purchases. Although uncertainties remain (a similar agreement in May last year quickly fell apart), stability in US-China relations is the most important external condition for improving the Renminbi exchange rate environment.

Third, the Federal Reserve’s policy shifts from tightening to easing

In the second half of 2024, the Fed began cutting interest rates, with further rate cuts expected in 2025. If economic data continues to weaken or inflation keeps falling, accelerated rate cuts will further pressure the USD. The Renminbi and the USD Index usually have an inverse relationship—the weaker the USD, the stronger the Renminbi.

Fourth, China’s monetary policy remains accommodative

Against the backdrop of a sluggish real estate market and insufficient domestic demand, the People’s Bank of China tends to release liquidity through rate cuts and reserve requirement ratio reductions. While easing policies may exert short-term depreciation pressure on the Renminbi, if combined with stronger fiscal stimulus to stabilize and improve the economy, it will support long-term demand for the Renminbi.

Fifth, the ongoing internationalization of the Renminbi

The use of the Renminbi in global trade settlement is increasing, and swap agreements with other countries are expanding. Although the US dollar’s reserve currency status is unlikely to be challenged in the short term, rising international recognition of the Renminbi will inevitably support its long-term trend.

International investment banks generally optimistic about the medium- to long-term appreciation of the Renminbi

The market widely believes that the Renminbi is at a cycle turning point, and a new phase of medium- to long-term appreciation has already begun.

Deutsche Bank analysts suggest that the recent strengthening of the Renminbi against the USD may signal the start of a long-term appreciation cycle. They forecast the USD/RMB exchange rate will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Goldman Sachs’ global FX strategy head expressed a more aggressive view in their May report. They raised their forecast for the USD/RMB exchange rate over the next 12 months to 7.0 and predicted that the “breaking below 7” (appreciating to below 7.0) will happen sooner than the market expects. Goldman Sachs’ logic is that the current real effective exchange rate of the Renminbi is undervalued by 12% compared to the ten-year average, with an underestimation against the USD of 15%. Based on progress in trade negotiations and the current undervaluation, the probability of the Renminbi reaching 7.0 within the next 12 months is quite high. Additionally, Goldman Sachs emphasizes that China’s strong export performance will support the Renminbi, and that the Chinese government prefers to use other policy tools to boost the economy rather than actively devalue.

Investment insights from the ten-year trend of the Hong Kong dollar to Renminbi exchange rate

Reviewing the ten-year trend of the Hong Kong dollar against the Renminbi reveals several key patterns:

Between 2015 and 2017, as the Renminbi exchange rate reform advanced, the HKD/RMB exchange rate experienced significant fluctuations. From 2018 to 2020, as the Renminbi appreciated gradually, the HKD/RMB rate remained relatively stable. In 2021 and 2022, the Renminbi entered a depreciation cycle, and the HKD/RMB rate moved higher accordingly.

This decade of history shows that the long-term trend of the HKD and Renminbi is highly correlated, but the Renminbi’s volatility is greater. For Hong Kong and Macau investors, capturing the major Renminbi cycle shifts often means seizing the best timing for Renminbi asset allocation.

Is now the right time to enter? Investment strategy interpretation

Based on the above analysis, there are indeed profit opportunities in currency pairs related to the Renminbi, but timing is crucial:

In the short term, the Renminbi is expected to remain relatively strong, with overall inverse correlation to the USD and limited fluctuation within a range. The rapid appreciation below 7.0 before the end of 2025 is less likely; more probable is a gradual appreciation rather than sharp volatility.

Key variables to monitor include: the real-time trend of the USD Index, changes in the Renminbi midpoint fixing signals, and the actual strength and implementation pace of China’s stabilizing growth policies. These three factors will directly influence the specific direction of the exchange rate.

Four frameworks for assessing the Renminbi trend

Besides passively following the market, investors should develop proactive judgment methods. Regardless of market changes, the Renminbi’s exchange rate trend can be systematically analyzed from the following four dimensions:

First layer: Central bank monetary policy signals

The People’s Bank of China’s policy stance directly impacts money supply and liquidity. Rate cuts or reserve requirement ratio reductions increase liquidity, generally exerting depreciation pressure on the Renminbi; conversely, rate hikes or reserve ratio increases tighten liquidity and support the Renminbi. Historically, at the end of 2014, the PBOC initiated a loosening cycle, cutting interest rates six times and significantly lowering reserve requirements, during which the USD/RMB rose from around 6.3 to over 7.4, fully reflecting the policy’s profound influence on the exchange rate.

Second layer: China’s economic fundamentals

Stable economic growth attracts sustained foreign investment inflows, increasing demand for the Renminbi and supporting its appreciation; economic slowdown leads to reduced or even outflow of foreign capital, weakening the Renminbi. Key data include: quarterly GDP figures reflecting macro conditions; PMI (Purchasing Managers’ Index) released monthly, with official and Caixin versions; CPI measuring inflation; urban fixed asset investment indicating domestic demand strength.

Third layer: USD index fluctuations

The USD/RMB trend is directly influenced by the USD Index performance. The Federal Reserve and the European Central Bank’s policies are critical. For example, in 2017, the Eurozone’s robust economic recovery and GDP growth outpacing the US, along with the ECB signaling tightening, caused the euro to rise, and the USD index to fall by 15% over the year, with the USD/RMB also declining accordingly.

Fourth layer: Official exchange rate management intentions

Unlike fully free-floating currencies, the Renminbi’s midpoint rate is guided by daily central bank quotes. After introducing the “counter-cyclical factor” in 2017, the PBOC’s guidance became more explicit. While this management is effective in the short to medium term, the long-term trend still depends on the broader direction of the currency market.

Review of USD/RMB exchange rate over the past five years

2020: Rapid reversal amid pandemic shocks

Early in the year, the USD/RMB fluctuated between 6.9 and 7.0. Due to US-China tensions and the pandemic, it briefly depreciated to 7.18 in May. However, China’s swift pandemic control and recovery, coupled with the Fed’s near-zero interest rates while China maintained stable policies, widened the interest rate differential, driving a strong rebound of the Renminbi, ending the year near 6.50, up about 6% for the year.

2021: Steady performance supported by strong exports

China’s continued strong exports and economic resilience, along with the PBOC’s prudent policies, kept the USD index low. The USD/RMB traded within 6.35 to 6.58, with an annual average around 6.45, maintaining relative strength.

2022: Sharp depreciation driven by aggressive Fed rate hikes

USD/RMB rose from 6.35 to over 7.25, depreciating about 8%, the largest decline in recent years. The main reasons were aggressive Fed rate hikes boosting the USD index, China’s strict pandemic policies dragging down the economy, a worsening real estate crisis, and declining market confidence.

2023: Volatility amid slower-than-expected recovery

USD/RMB fluctuated between 6.83 and 7.35, averaging about 7.0. China’s economic recovery post-pandemic fell short of expectations, with ongoing real estate debt issues and sluggish consumption, while high US interest rates continued to lift the USD, putting pressure on the Renminbi.

2024: Weakening USD offers relief

USD index ranged from 100 to 104, easing pressure on the Renminbi. China’s fiscal stimulus and real estate support measures boosted confidence. The USD/RMB volatility increased, with offshore Renminbi breaking above 7.10 in August to reach a six-month high.

Why Hong Kong and Macau investors should pay attention to this Renminbi appreciation cycle

According to historical patterns, policy-driven exchange rate cycles often last around ten years. The current Renminbi appreciation cycle’s initiation has significant implications for cross-border investment, asset allocation, and currency hedging in Hong Kong and Macau. The ten-year trend of the HKD/RMB exchange rate indicates that when the Renminbi enters a structural appreciation phase, investors in Hong Kong and Macau often find optimal timing for Renminbi asset allocation.

In the medium term, the expectation is that the Renminbi will gradually appreciate below 7.0 and further to the 6.7–6.8 range within the next two years. Although short-term fluctuations are inevitable, the overall direction is clear. By mastering the four key factors—USD Index, central bank policies, economic data, and US-China relations—investors can greatly increase their chances of profiting from the exchange rate market.

The foreign exchange market, involving macro factors, is characterized by transparency and openness, with publicly available data from various countries and large trading volumes supporting two-way trading. For investors, it is a relatively fair and transparent market. Now is an excellent time for Hong Kong and Macau investors to reassess the value of Renminbi asset allocation.

Reasons offshore Renminbi outperforms onshore Renminbi

Since offshore Renminbi (CNH) is traded in international markets like Hong Kong and Singapore, with unrestricted capital flows, it can more directly reflect global market sentiment. Therefore, CNH’s volatility often exceeds that of the onshore Renminbi (CNY), which is subject to capital controls and central bank interventions.

In 2025, despite multiple fluctuations, offshore Renminbi (CNH) against the USD generally trended upward. Early in the year, due to US tariff policies, CNH briefly fell below 7.36. The People’s Bank of China promptly took measures to stabilize, including issuing 60 billion yuan of offshore bills to absorb liquidity and controlling the midpoint. Recently, with easing US-China dialogue, policy stabilization efforts, and the Fed’s rate cut expectations rising, CNH has strengthened significantly, breaking through 7.05 on December 15, rebounding over 4% from the early-year high, reaching a 13-month high. For Hong Kong and Macau investors, offshore Renminbi often pre-emptively reflects the market’s true expectations of Renminbi movement.