## What Will Happen to the US Dollar vs. Renminbi in 2026? Should You Enter Renminbi Assets Now?

The trend of the Renminbi exchange rate in 2025 has already undergone a clear shift. After breaking free from the three-year downward trend against the US dollar, the Renminbi is brewing a new appreciation cycle. From the volatility at the beginning of the year to the recent strong rebound, the USD/RMB exchange rate has fallen from a high of 7.4 to around 7.04, reaching the highest level in nearly 14 months. What investment opportunities are hidden behind this?

### The turning point for Renminbi appreciation has appeared

As of mid-December 2025, the onshore USD/CNY market (CNY) continued to fluctuate between 7.04 and 7.3, with an appreciation of about 3% for the year. The offshore market performed more sensitively, with USD/CNH oscillating between 7.02 and 7.4, reacting more quickly to international political and economic developments.

The first half of the year was completely different. Under the dual pressures of global trade policy uncertainty and a strengthening US dollar index, the Renminbi depreciated to above 7.4 and even touched a historic low since the 8.11 exchange rate reform in 2015. However, in the second half, the situation reversed sharply. As China-US trade negotiations gradually advanced, bilateral relations eased, and the US dollar index shifted from strength to weakness, the Renminbi entered a phase of "moderate appreciation."

### Three key factors driving USD/RMB trend

**The volatility of the US dollar index remains the primary variable**

In the first half of 2025, the US dollar index fell from 109 at the beginning of the year to around 98, a decline of nearly 10%, marking the weakest half-year performance since the 1970s. But after entering autumn and winter, the situation reversed. With the Fed's rate cut expectations cooling and US economic performance exceeding expectations, the dollar index rose back above 100. However, in December, the Fed ultimately decided to cut rates again, causing the dollar index to weaken, with a low of 97.869, returning to the 97.8-98.5 range. Although a moderate strengthening of the dollar usually puts pressure on the Renminbi, positive signals from the China-US agreement temporarily offset this negative impact.

**Progress in China-US trade negotiations is crucial**

The latest round of China-US trade talks just concluded in Kuala Lumpur, with both sides reaching a consensus to cease trade hostilities. The US will reduce tariffs on Chinese goods related to fentanyl from 20% to 10%, and continue to suspend the 24% retaliatory tariffs until November 2026. Both countries also agreed to temporarily halt measures such as rare earth export controls and port fees, and to expand agricultural product purchases. This agreement provides support for the Renminbi exchange rate, but past lessons warn us—similar agreements reached in Geneva in May this year quickly fell apart, and market doubts about the durability of negotiations remain.

**The interplay between Federal Reserve and People's Bank policies**

The Fed's monetary policy directly influences the US dollar trend, while the People's Bank's policy orientation determines the relative performance of the Renminbi. Currently, the Fed may slow down rate cuts (if inflation remains high), while the People's Bank tends to maintain easing to support economic recovery. In this shift from "tightening in the US and easing in China" to "easing in both," the Renminbi and the US dollar index show inverse fluctuations. Additionally, the progress of Renminbi internationalization and the reallocation of foreign capital into Renminbi assets will also provide support in the medium to long term.

### How do international investment banks view the future trend?

Several top investment banks have recently expressed optimism about the Renminbi outlook. **Deutsche Bank** believes that the recent strengthening of the Renminbi against the US dollar may signal the start of a long-term appreciation cycle. The bank forecasts that 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** offers a more aggressive view. In a report, Kamakshya Trivedi, head of global FX strategy, pointed out that the real effective exchange rate of the Renminbi is undervalued by 12% compared to its ten-year average, with an even larger undervaluation of 15% against the US dollar. Based on this assessment, Goldman Sachs has raised its forecast for the USD/RMB exchange rate over the next 12 months from 7.35 to 7.0, implying that the "breaking 7" (falling below 7) may occur sooner than market expectations. Goldman’s logic is that China’s export resilience is strong, and the government prefers to stimulate the economy through fiscal tools rather than devaluation strategies.

### Is it suitable to buy Renminbi now?

In the short term (before the end of 2025), the Renminbi exchange rate is expected to remain relatively strong, but rapid appreciation is limited. The USD/RMB may fluctuate widely between 7.0 and 7.3, rather than breaking through 7.0 in one go. For investors wanting to participate in Renminbi appreciation, timing is key.

Subsequently, three major variables should be closely monitored. First is the **US dollar index trend**—if the dollar returns above 100, it will pressure the Renminbi; second is the **Renminbi midpoint rate signals**—the People's Bank’s daily quotes imply official currency policy; third is the **strength of China’s growth stabilization policies**—improving economic data will directly support the Renminbi.

Until these variables become clearer, investing in Renminbi-related currency pairs can be profitable, but a cautious approach to timing is necessary.

### How to judge the trend of the Renminbi exchange rate—A must-read guide for investors

Having understood external factors, it’s helpful to grasp a few dimensions for independent analysis.

**Follow the People's Bank of China's monetary policy signals**

Monetary policy stance directly determines the money supply. Rate cuts or reserve requirement ratio reductions mean increased liquidity, usually exerting downward pressure on the Renminbi; conversely, rate hikes or reserve ratio increases tighten liquidity and support currency strength. Observing the PBOC’s interest rate decisions, reserve ratio adjustments, and open market operations can help forecast the medium-term trend of the Renminbi. In 2014, when the PBOC adopted a loosening cycle, USD/RMB rose from 6 to 7.4, demonstrating the profound impact of monetary policy on the exchange rate.

**Pay attention to China's economic data**

When China’s economy is stable and outperforming other emerging markets, foreign capital inflows increase demand for the Renminbi, pushing the exchange rate higher. Conversely, if growth slows, foreign investment shifts elsewhere, putting pressure on the Renminbi. Key indicators include quarterly GDP, monthly PMI (both official and Caixin, reflecting large and small/medium enterprises), CPI inflation rate (affecting central bank decisions), and fixed asset investment data.

**Monitor the US dollar index and Fed moves**

Changes in the US dollar index directly influence USD/RMB fluctuations, and the Fed’s monetary policy is the decisive factor for the dollar’s trend. Policies of other major central banks like the ECB and Bank of England also indirectly impact the dollar’s strength. For example, in 2017, as Europe’s economy recovered strongly and the ECB signaled tightening, the dollar index fell 15% for the year, and USD/RMB weakened accordingly.

**Interpret official guidance on the exchange rate**

Unlike freely floating exchange rates, the Renminbi has undergone multiple reforms since 1978. The latest improvement in 2017 introduced the "countercyclical factor," strengthening the PBOC’s guiding role. In the short term, official midpoint quotes and foreign exchange interventions significantly influence the rate, but the medium- and long-term trend is still determined by the overall direction of the currency market.

### Review of Renminbi exchange rate trends over the past five years

**2020: Pandemic and recovery**

At the start of 2020, USD/RMB fluctuated between 6.9 and 7.0, but in May, amid tense China-US relations and pandemic shocks, it depreciated to 7.18. As China quickly controlled the pandemic and led economic recovery, coupled with the Fed’s near-zero rate cuts and China’s steady policies, the interest rate differential supported a strong rebound of the Renminbi to around 6.50 by year-end, appreciating about 6% for the year.

**2021: Continued strength**

With China’s export boom, economic improvement, and steady central bank policies, the USD index remained low. USD/RMB fluctuated narrowly between 6.35 and 6.58 throughout the year, averaging about 6.45, with the Renminbi remaining relatively strong.

**2022: Significant depreciation**

This year marked a turning point. The Fed’s aggressive rate hikes pushed the US dollar index up, and USD/RMB rose from 6.35 to above 7.25, depreciating about 8% for the year, the largest decline in recent years. Meanwhile, China’s strict epidemic policies, slowing growth, and worsening real estate crisis dampened market confidence.

**2023: Continued pressure**

USD/RMB fluctuated between 6.83 and 7.35, averaging about 7.0, ending around 7.1. China’s post-pandemic recovery was weaker than expected, the real estate debt crisis persisted, consumption remained sluggish, and high US interest rates supported the dollar.

**2024: Increased volatility**

The weakening of the dollar eased pressure on the Renminbi, with a mid-year rise to 7.3, and offshore RMB broke 7.10 in August, hitting a six-month high. Overall, volatility increased significantly.

### The special performance of offshore Renminbi (CNH)

Because CNH is traded in international markets like Hong Kong and Singapore, with capital flows unrestricted, it reflects global market sentiment. Onshore RMB (CNY), however, is subject to capital controls and the PBOC’s midpoint guidance, so **CNH’s volatility is usually larger and more sensitive**.

In 2025, despite multiple fluctuations, CNH generally trended upward. Early in the year, impacted by US tariffs and a soaring dollar index to 109.85, CNH briefly broke below 7.36. The PBOC then took measures to stabilize the market, including issuing 60 billion yuan of offshore bonds to recover liquidity and controlling the midpoint rate. Recently, with warming China-US dialogue, the implementation of China’s growth stabilization policies, and rising US rate cut expectations, CNH has strengthened significantly. In mid-December, CNH broke below 7.05 against the dollar, rebounding more than 4% from the high at the start of the year, reaching a 13-month high.

( Summary: Focus on key influencing factors to improve profit probability

As China enters a sustained easing cycle, USD/RMB shows clear trend characteristics. Based on historical policy-driven cycles, these can last up to ten years, with short- and medium-term performance affected by USD movements and other events. Investors can greatly enhance their profit chances in the forex market by mastering four key factors: monetary policy, economic data, USD trend, and official guidance.

The forex market is mainly driven by macro factors, with data transparency and large trading volumes supporting two-way trading, making it a relatively fair and advantageous investment field for individual investors. Grasping the new appreciation cycle of the Renminbi, the returns in 2026 could be quite promising.