Is there still hope for the RMB to appreciate? The central bank may continue to guide it to strengthen in 2026

The RMB to USD exchange rate recently hit a new high since September 2024, and market sentiment has clearly shifted to bullish. The latest data at the end of December shows that USD to offshore RMB (USD/CNH) has fallen below 6.9965, and USD to onshore RMB (USD/CNY) has also retreated to around 7.0051, a level rarely seen since May 2023.

Three forces jointly driving the appreciation of the RMB

Behind this round of appreciation, multiple factors are at play.

The USD Index hitting a new low for the year is the main driver. Under the backdrop of the Federal Reserve’s continued rate cuts, USD liquidity remains ample. The index has fallen more than 10% this year and dropped over 2% in the past month. In an environment where the USD is generally weakening, the RMB naturally receives relative support. This logic is similar to when ETH exchanges for USD—when the USD depreciation channel opens, the USD value of other assets rises.

The “moderate guidance” from the central bank continues to exert influence. Data from the China Foreign Exchange Trade System shows that the central bank has repeatedly adjusted the RMB’s midpoint rate this year, with the overall direction being to guide appreciation. This policy-level support is more directional than spontaneous market fluctuations.

Year-end foreign exchange settlement wave provides the final push. In 2025, China’s trade surplus is huge. As the year-end approaches, companies concentrate on settling and converting foreign exchange, directly boosting RMB demand. Meanwhile, there are no signs of further rate cuts by the central bank, and liquidity in the offshore market has tightened, all reinforcing the appreciation expectations.

Will it rise again in 2026? How do institutions view it?

Although breaking the 7 mark is a psychological threshold, many large investment banks are quite optimistic about the RMB’s future.

ANZ Bank believes that in the first half of 2026, USD to RMB will fluctuate between 6.95 and 7.00, but a significant rebound is unlikely.

Goldman Sachs’s prediction is more aggressive, directly stating that the RMB is undervalued by about 25% relative to its economic fundamentals. Their target is a decline to 6.90 by mid-2026, and further down to 6.85 by the end of the year.

Bank of America mentioned the improvement in geopolitical factors—if US-China tensions ease, Chinese exporters will be more active in selling USD, which will further strengthen the RMB’s appreciation momentum. According to this logic, USD to RMB could fall to 6.80 by the end of 2026.

Dongxing Securities’ chief analyst pointed out that the continued strength of the RMB helps attract foreign investment into China’s capital markets, creating a positive feedback loop—appreciation expectations attract more foreign capital, which further pushes up the RMB.

The other side of appreciation

From the perspective of trade-weighted indices and economic fundamentals, the market generally believes that the RMB still has room to appreciate and is not excessively overvalued. However, the issue is that appreciation exerts objective pressure on exports, and the central bank needs to find a balance between RMB appreciation and export competitiveness.

Overall, the main trend of RMB appreciation in 2026 may be set, but the specific pace and magnitude will depend on US dollar policies, trade environment, and market liquidity changes.