The RMB is strengthening! Goldman Sachs predicts that by 2026, the US dollar will rise to 6.85 against the RMB, with internationalization accelerating soon.

Recently, the RMB has shown a fierce trend, and the relationship between the exchange rate and the US dollar against the RMB is undergoing significant changes. As of November 26, the USD onshore RMB (USD/CNY) fell to 7.0824, and the USD offshore RMB (USD/CNH) fell to 7.0779, both hitting a new low in over a year. What are the driving forces behind this?

Federal Reserve Rate Cuts Open Up Appreciation Space, Central Bank Precisely Guides Exchange Rate

The Fed’s gradual rate cuts provide a macro background for the RMB’s appreciation, but the real driving force comes from domestic factors. The People’s Bank of China (PBOC) has been guiding the exchange rate higher by setting the daily midpoint (with the spot rate fluctuating within 2% of the midpoint), while state-owned banks frequently buy US dollars to stabilize fluctuations, steadily pushing the exchange rate upward. What is the deeper meaning behind this precise operation?

The CFETS RMB Exchange Rate Index rose to 98.22 on November 21, reaching its highest level since April this year, enough to demonstrate the strength of this orderly appreciation. In comparison, in 2018, the RMB depreciated about 5% amid the trade war impact, whereas by 2025, it has appreciated nearly 3%, forming a stark contrast.

Strategic Outlook: RMB Internationalization Becomes Policy Priority

Kelvin Lam, Senior Economist at Pantheon Macroeconomics, pointed out that from a strategic perspective, China seems to aim at establishing international credibility by demonstrating a stable RMB image. This approach recalls the historical move during the 1998 Asian financial crisis, when the RMB refused to join the competitive devaluation wave, thereby consolidating its regional anchor currency status.

Kiyong Seong, Chief Asia Macro Strategist at Société Générale, believes that showing strength and stability of the RMB in turbulent market conditions provides strong evidence for promoting RMB internationalization. The latest data from the Bank for International Settlements shows that since the last survey in 2022, the daily trading volume of USD against RMB has increased by nearly 60% to $781 billion, accounting for over 8% of total global daily foreign exchange trading, indicating a significant increase in market participation.

Institutional Forecast: Targeting 6.85 as the New Goal

Goldman Sachs analysts’ latest forecast is particularly noteworthy. Given the authorities’ recognition of the RMB’s strong trend, they expect the exchange rate to reach 1 USD to 7 RMB by the end of the year, and to continue rising to 6.85 in one year (2026). This means there is further appreciation potential from the current 7.08 to 6.85.

Goldman Sachs further stated that, based on economic and non-economic factors, RMB internationalization has become a key policy focus of the Chinese government, and it is expected to accelerate significantly in the coming years. For forex traders and multinational corporations, changes in the USD to RMB exchange rate will directly impact costs and revenue structures. This trend should not be underestimated.

The RMB appreciation cycle has already begun. Whether for hedge funds or real enterprises, there is a need to reassess the allocation strategies for RMB assets.