RMB Exchange Rate Outlook 2026 | Breaking 7 Soon? In-Depth Analysis of USD to RMB Trend Forecast

Renminbi Appreciation Window Opens, USD to RMB Trend Faces a Turning Point

The currency market landscape of 2025 has quietly changed. After three consecutive years of depreciation against the US dollar, the RMB has experienced a reversal this year—since the beginning of the year, USD to RMB has oscillated between 7.04 and 7.3, with an accumulated appreciation of about 3%. The latest rate has reached 7.0404, hitting a 14-month high. What does this reflect? What is the market expecting?

From the data, offshore RMB(CNH) performs more sensitively, fluctuating between 7.02 and 7.4, higher than the onshore market, indicating that international capital’s attitude toward the RMB is changing more rapidly. After the Federal Reserve’s rate cut in December, the US dollar index fell back to the 97.8-98.5 range, further creating room for RMB appreciation.

All of this is not coincidental. The monetary policy tug-of-war in the first half of the year, progress in US-China negotiations in the second half, and the global dollar cycle shift are working together to push the RMB onto a new appreciation trajectory.

Four Major Factors Influencing the USD to RMB Trend

Long-term Weakening Trend of the US Dollar Index

In the first half of 2025, the USD index fell from 109 at the start of the year to 98, a decline of nearly 10%, marking the weakest first half since the 1970s. Behind this decline, market expectations of Fed rate cuts have intensified, and the narrowing growth gap between the US economy and other global economies is also reflected.

Although the USD briefly rebounded above 100 in November (due to easing rate cut expectations), after December’s rate cut, the Fed turned dovish, and the USD index declined again. This structural weakening is positive for the RMB, as the RMB and USD index are usually inversely correlated. A moderate strengthening of the USD would pressure the RMB, but the overall momentum of the USD has shifted from strength to weakness, providing significant support for RMB appreciation.

Uncertainty in US-China Economic and Trade Relations Is Diminishing

Trade frictions between the US and China over the past year have had a profound impact on the forex market. In the first half, uncertainty over tariffs caused offshore RMB to break through 7.40 and even hit a new record since the August 11, 2015, “FX reform.” Market expectations of RMB depreciation increased significantly.

But the tone has changed. Recent signals from the China-US trade negotiations in Kuala Lumpur are positive—both sides reached a trade truce, the US reduced tariffs on fentanyl-related goods from 20% to 10%, and the 24% tariff surcharge was suspended until November 2026; both countries also agreed to delay rare earth export controls and expand US agricultural purchases.

Although lessons from the past (such as the Geneva agreement in May this year) still linger, this round of negotiations at least demonstrates ongoing dialogue. The easing of US-China trade tensions is the most important external variable in judging the USD to RMB trend. If this situation persists, the environment for RMB appreciation will be more stable.

Clear signals of the Fed shifting from tightening to easing

The Fed’s stance directly determines the strength of the USD. In the second half of 2024, the Fed signaled rate cuts, and the key variable for 2025 is the magnitude and pace of these cuts. If inflation remains high, the Fed may slow down rate cuts and maintain high interest rates to support the dollar; if economic slowdown becomes apparent, accelerating rate cuts will weaken the USD.

Current signs lean toward the latter—December’s rate cut was as expected, and the published dot plot hints at fewer rate cuts in the future, but the overall tone remains dovish. Under this policy environment, the USD is unlikely to sustain long-term strength, naturally supporting the RMB.

The Balance Between PBOC Policies and Economic Fundamentals

The People’s Bank of China (PBOC) tends to adopt an accommodative monetary policy to support economic recovery. Against the backdrop of a sluggish real estate sector and insufficient domestic demand, further rate cuts or reserve requirement ratio reductions are possible. Loose monetary policy usually exerts downward pressure on the RMB, but if accompanied by stronger fiscal stimulus that stabilizes the economy, it will boost the RMB’s long-term performance.

Additionally, the internationalization of the RMB is subtly supporting its exchange rate. The increasing share of RMB settlement in cross-border trade and the expansion of currency swap agreements with other countries contribute to RMB stability over the long term. In the short term, the USD remains the main reserve currency, but the trend is changing.

How Do International Investment Banks View the RMB Trend in 2026?

The market generally believes that the RMB is at a cyclical turning point, ending the depreciation cycle that began in 2022, and has the potential to enter a new medium- to long-term appreciation phase.

Deutsche Bank’s analysis indicates that the recent strengthening of the RMB against the USD signals the start of a long-term appreciation cycle. The bank forecasts the USD to RMB exchange rate will rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026. This implies that over the next year or so, the RMB could appreciate by more than 4% against the USD.

Goldman Sachs’ global FX strategist Kamakshya Trivedi’s report caused a stir in the investment community. Goldman Sachs sharply raised its forecast for the USD to RMB exchange rate over the next 12 months from 7.35 to 7.0, suggesting that the “breaking 7” level might come sooner than expected. The logic is that the current real effective exchange rate of the RMB is undervalued by 12% relative to the ten-year average, with an even greater undervaluation of 15% against the USD. Based on progress in US-China trade negotiations and the current undervaluation, the RMB is expected to appreciate to 7.0 within 12 months.

Both institutions are optimistic about RMB appreciation, with expected gains between 4% and 5%.

Is Now a Good Time to Buy RMB? Three Key Investment Points

From a short-term trading perspective, RMB-related currency pairs do present profit opportunities, but timing is crucial:

1. Short-term Trend Judgment: The RMB is expected to remain relatively strong in the near term, with limited fluctuations and inverse correlation with the USD. Rapid appreciation below 7.0 before the end of 2025 is less likely, so aggressive long positions should be cautious.

2. Three Monitoring Indicators: Future focus should be on the USD index trend (determining the ceiling), signals from the RMB midpoint rate (reflecting official intentions), and the strength and pace of China’s stabilizing growth policies (affecting RMB attractiveness).

3. Risk Warning: If US-China relations heat up again, RMB will face depreciation pressure; if the Fed unexpectedly turns hawkish, the USD rebound potential should not be underestimated.

Four Core Perspectives to Grasp Exchange Rate Dynamics

Investing in RMB-related currency pairs depends heavily on accurately predicting trends. The following four dimensions form an eternal framework for observing RMB exchange rates:

First Layer: Monetary Policy Tightness

The PBOC’s monetary policy directly influences money supply and exchange rates. Easing measures like rate cuts and reserve requirement ratio reductions increase RMB supply, leading to a weaker exchange rate; tightening measures like rate hikes and reserve ratio increases constrain liquidity, supporting RMB strength. For example, in 2014, the central bank cut loan rates six times and lowered reserve requirements significantly, during which USD/RMB rose from 6 to over 7.4, illustrating the profound impact of monetary policy.

Second Layer: Economic Data Performance

Stable growth and relative strength of China’s economy attract sustained foreign investment, increasing demand for RMB and supporting appreciation; conversely, economic slowdown reduces foreign interest and pressures RMB depreciation. Key indicators include:

• GDP quarterly data (macro-economic barometer)
• PMI monthly data (official and Caixin versions reflect large and small/medium enterprise activity)
• CPI data (inflation levels, influencing policy stance)
• Urban fixed asset investment (economic activity indicator)

Third Layer: US Dollar Cycle Changes

The USD trend directly determines USD to RMB movement. The Federal Reserve and ECB policies are often key drivers. For example, in 2017, the Eurozone’s stronger-than-expected recovery and ECB’s tightening signals pushed the euro higher, while the USD index fell 15%, and USD/RMB also declined, showing high correlation.

Fourth Layer: Official Exchange Rate Guidance

Unlike fully market-driven pricing, RMB exchange rates have an official guiding component. In the last major adjustment in May 2017, the PBOC shifted the midpoint rate model from “closing price + a basket of currencies” to “closing price + basket + counter-cyclical factor,” strengthening official guidance. In the short term, this influences the rate significantly, but long-term trends still follow the broader market direction.

Review of RMB Exchange Rate Changes in the Past Five Years

2020: Turning Point Amid the Pandemic

Early 2020, USD to RMB was between 6.9 and 7.0. Due to US-China trade tensions and COVID-19, it briefly broke below 7.18 in May. As China controlled the pandemic early and economic recovery began, coupled with the Fed’s near-zero rates and China’s steady policies, the interest rate differential supported RMB rebound, ending the year around 6.50, with a total appreciation of about 6%.

2021: A Year of Strong Exports

China’s exports remained robust, and the economy improved. The PBOC maintained steady policies, and the USD index stayed low, fluctuating between 6.35 and 6.58, averaging about 6.45 for the year, with the RMB remaining relatively strong.

2022: Impact of Aggressive Fed Rate Hikes

This was a turning point. USD to RMB rose from 6.35 to over 7.25, depreciating about 8%, the largest decline in recent years. The Fed’s aggressive hikes pushed the USD index higher, while China’s strict pandemic measures and real estate crisis dragged down the economy, undermining market confidence.

2023: Bottoming in a Downtrend

USD to RMB fluctuated between 6.83 and 7.35, averaging about 7.0, ending around 7.1. China’s post-pandemic recovery fell short of expectations, the real estate debt crisis persisted, consumption remained weak, and high US interest rates kept the USD strong, pressuring the RMB.

2024: Signs of Rebound Amid Volatility

The USD trend weakened, easing RMB pressure. China’s fiscal stimulus and real estate support measures boosted confidence. USD to RMB rose from 7.1 at the start of the year to 7.3 mid-year, offshore RMB broke below 7.10 to a six-month high in August, with increased volatility signaling a new cycle.

2025 Offshore RMB Outlook

Offshore RMB(CNH), traded in markets like Hong Kong and Singapore, enjoys freer trading and capital flows, often more volatile than onshore RMB(CNY), and more sensitive to global market sentiment.

In 2025, CNH against USD experienced multiple fluctuations but overall trended upward. Early in the year, US tariff policies and the USD index soared to 109.85, causing CNH to briefly break below 7.36, prompting PBOC measures such as issuing 60 billion offshore bonds to stabilize liquidity and controlling the midpoint rate.

A turning point occurred as US-China trade dialogue eased, China’s steady growth policies took effect, and market rate cut expectations increased. On December 15, CNH/USD broke below 7.05, rebounding over 4% from the year’s high, reaching a 13-month high, signaling renewed market confidence in RMB appreciation.

Summary: Investment Strategy for RMB Appreciation Cycle

As China’s monetary policy enters a sustained easing cycle, USD to RMB(USDCNH) shows clear trend movements. Historically, similar policy-driven cycles can last over ten years, with short- and medium-term fluctuations driven by USD cycles and other events.

For investors, understanding the four key factors—monetary policy, economic data, USD cycle, and official guidance—can greatly improve profit prospects. The forex market is primarily macro-driven, with transparent data releases, large trading volumes, and support for two-way trading, providing a relatively fair and advantageous participation environment for individual investors. The RMB appreciation window is opening, but timing and risk management remain crucial for success.