2026 RMB to USD exchange rate outlook: Has the appreciation cycle begun?

Since 2025, the performance of the RMB against the US dollar has been volatile. This year broke the trend of continuous depreciation over the past three years, with the exchange rate oscillating between 7.1 and 7.3, appreciating a total of 2.40% for the year. The offshore market was even more sensitive, with the USD against offshore RMB appreciating a total of 2.80%, with fluctuations between 7.1 and 7.4. After November, supported by easing US-China trade tensions and rising expectations of Federal Reserve rate cuts, the RMB against the USD once rose below 7.08, reaching a low of 7.0765, marking the best performance in nearly a year.

Review of 2025: The Turning Year for the RMB Exchange Rate

The RMB performance in the first half of the year was not ideal. Uncertainty in global tariff policies, the continued strengthening of the US dollar index, and other factors jointly caused offshore RMB to briefly fall below 7.40, with the USD against RMB reaching a new high since 2022 and even breaking the historical record since the “8.11 reform” in 2015. Market concerns about RMB depreciation surged.

A turning point gradually emerged in the second half. As progress was made in US-China trade negotiations and bilateral relations eased, the US dollar index also began to weaken, stabilizing and gradually rebounding the RMB exchange rate. Against the backdrop of major international currencies like the euro and pound appreciating generally, the RMB also achieved moderate appreciation, and market sentiment clearly improved.

RMB Exchange Rate Trajectory in the Past Five Years: Evidence of Cyclical Changes

Observing the USD against RMB over the past five years reveals several obvious cycle transitions:

2020 Reversal - At the beginning of the year, the exchange rate fluctuated between 6.9 and 7.0. Amid US-China trade tensions and pandemic shocks, RMB fell to 7.18 in May. But as domestic pandemic control improved and the economy recovered first, coupled with the Fed cutting rates to near zero and the central bank maintaining a prudent policy leading to wider interest rate differentials, RMB rebounded strongly to around 6.50 by year-end, appreciating about 6% for the year.

2021 Stability - Supported by sustained strong exports and economic growth, the US dollar index remained low. USD against RMB fluctuated narrowly between 6.35 and 6.58, with an annual average of about 6.45, maintaining relative strength.

2022 Challenge - Aggressive Fed rate hikes and soaring US dollar index pushed USD against RMB from 6.35 to over 7.25. Meanwhile, strict domestic pandemic policies hampered the economy, and a real estate crisis worsened, leading to RMB depreciation of about 8%, the largest decline in recent years.

2023 Volatility - USD against RMB repeatedly fluctuated between 6.83 and 7.35, with an average of about 7.0, ending the year near 7.1. Domestic economic recovery fell short of expectations, real estate debt issues persisted, and high US interest rates supported the dollar, putting significant pressure on the RMB.

2024 Disruptions - The US dollar weakened, and China’s fiscal stimulus measures boosted confidence. USD against RMB rose from 7.1 to 7.3 mid-year, with offshore RMB briefly breaking below 7.10 in August to hit a six-month high, and overall volatility increased significantly.

RMB Exchange Rate Forecast for 2026: Possibility of an Appreciation Cycle

The market generally believes that the depreciation cycle starting in 2022 may have ended, and the RMB could enter a new phase of medium- to long-term appreciation. Looking ahead to the end of 2025 and into 2026, many international investment institutions are optimistic about RMB appreciation.

Deutsche Bank’s analysis indicates that the recent strengthening of RMB against USD suggests the beginning of a long-term appreciation cycle. The bank expects RMB to rise to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Morgan Stanley also remains optimistic about moderate RMB appreciation, believing that the USD will continue to weaken over the next two years. The firm forecasts the USD index could fall back to 89 by the end of 2026, with the RMB against USD potentially reaching around 7.05.

Goldman Sachs’ global FX strategy team presents a more aggressive view, raising the 12-month USD/RMB forecast from 7.35 to 7.0, suggesting that the “breaking 7” point for RMB may arrive sooner than market expectations. Goldman Sachs’ reasoning is that the current real effective exchange rate of RMB is undervalued by 12% relative to the ten-year average, and the undervaluation against the USD is as high as 15%. Based on progress in US-China trade negotiations and the current undervaluation, RMB could appreciate to 7.0 within 12 months. Additionally, strong export performance will provide robust support for RMB.

Four Key Factors Affecting the RMB Exchange Rate

Turning of the US dollar index - In the first five months of 2025, the USD index fell sharply by 9%, marking the worst start in history. Market expectations of imminent Fed rate cuts and declining short-term interest rates will likely push Asian currencies, including RMB, higher.

US-China relations - Although recent negotiations have made progress, the durability of this truce remains uncertain. Tariff issues are still a key variable affecting USD to RMB exchange rates—easing negotiations will benefit RMB, while escalating tensions will increase depreciation pressure.

Fed policy pace - The Fed signaled rate cuts in the second half of 2024, but the magnitude and pace of rate reductions in 2025 will be constrained by inflation data, employment performance, and policy considerations. If inflation remains above target, the Fed may slow the rate cut pace, continuing to support the dollar; otherwise, the dollar could weaken.

Central bank policy orientation - To support economic recovery, the central bank tends to maintain an accommodative stance, with rate cuts or reserve requirement reductions to release liquidity. In the short term, this may exert downward pressure on the RMB, but if policies take effect and the economy stabilizes, it will boost long-term RMB demand.

Investment Perspectives: How to Judge RMB Exchange Rate Trends

To grasp the long-term direction of the RMB exchange rate, monitor the following aspects continuously:

Central bank monetary policy stance - Monetary policy directly influences money supply and exchange rates. Loose policies (rate cuts, reserve requirement reductions) usually exert downward pressure on the currency; tightening (rate hikes, reserve increases) supports currency appreciation. Historically, after the PBOC launched a loosening cycle in 2014, USD/RMB rose from 6 to 7.4 over several years, confirming this pattern.

Domestic economic data - Stable economic growth and outperforming other emerging markets can attract sustained foreign investment inflows, increasing demand for RMB. Key indicators include GDP growth, PMI, CPI, fixed asset investment, etc. These data points directly impact RMB’s long-term attractiveness.

Absolute trend of the US dollar index - USD/RMB movements are highly correlated with the USD index. The policies of the Fed and ECB are often the main drivers. For example, in 2017, as the Eurozone economy recovered and the ECB signaled tightening, the USD index fell 15% for the year, and USD/RMB also declined similarly.

Official guidance signals - Since the last reform in May 2017, the RMB/USD central parity quoting model has incorporated a “counter-cyclical factor,” strengthening official guidance. This has a noticeable short-term impact on exchange rates, but the medium- to long-term trend is still driven by fundamentals.

Ways to Invest in RMB

Currently, investors can choose from several channels to invest in RMB:

Through commercial banks - Open foreign exchange accounts and conduct FX trading and investments via local or international banks.

Forex broker platforms - Partner with reputable brokers for online FX trading, which offer market liquidity and trading tools. Many support two-way trading (long and short), allowing profits from appreciation and opportunities to profit from depreciation through short positions. Most platforms also offer leverage, but caution is needed as leverage amplifies risks.

Securities firms - Some securities companies provide FX trading services.

Futures exchanges - Trade standardized USD/RMB futures contracts on futures markets.

When choosing a platform, focus on: regulatory compliance, platform reputation and size, trading costs, and risk management tools.

Overall Outlook

As global monetary policy environments shift, the RMB is at a critical juncture transitioning from a long-term depreciation cycle to a new appreciation cycle. Based on historical experience, such cycle transitions can last around ten years, with short- and medium-term fluctuations influenced by USD trends and external events, but with a clear overall direction.

By focusing on the core factors influencing RMB exchange rates—Fed policy, central bank stance, economic data, and US-China relations—investors can significantly improve their chances of profiting during this appreciation cycle. The FX market’s transparency, high trading volume, and two-way trading make it relatively fair for retail investors and a good opportunity for long-term RMB allocation.