In-Depth Analysis of the RMB to USD Exchange Rate Trend | Exchange Rate Developments in the Second Half of 2025 and Outlook for 2026

Turning Point Has Arrived, Renminbi Appreciation Cycle Begins

2025 is poised to be the year of the Renminbi’s turning point. After experiencing three consecutive years of depreciation against the US dollar from 2022 to 2024, the Renminbi has finally reversed course. The latest market data shows the USD/RMB exchange rate has fallen back to around 7.0404, hitting a 14-month high, a clear signal — market sentiment towards the Renminbi is changing.

Looking back at this year’s trajectory, USD/RMB has fluctuated repeatedly within the 7.04 to 7.3 range, with an accumulated appreciation of about 3% for the year, demonstrating strong resilience. The offshore Renminbi (CNH) has fluctuated between 7.02 and 7.4, showing higher sensitivity to international factors. This range-bound pattern precisely reflects a market expectation shift — from pessimism to cautious optimism.

The Shadow in the First Half and the Turning Point in the Second Half

In the first half of this year, the Renminbi faced considerable pressure. Global trade policy uncertainties intensified, the US dollar index continued to strengthen, and offshore Renminbi once broke through 7.40, setting a new record since the 2015 “8.11” reform. Market sentiment was extremely bearish on the Renminbi, with widespread depreciation expectations.

However, in the second half, the situation changed qualitatively. Progress was made in US-China trade negotiations, and signs of easing emerged in bilateral relations. As the US dollar index shifted from strength to weakness, the Renminbi began to show a moderate and stable appreciation trend. Against the backdrop of a generally strengthening euro, pound, and other major non-dollar currencies, the Renminbi also recovered its losses. In mid-December, the Renminbi broke through the 7.05 mark decisively, with a strong and sustained rally.

Three Major Drivers Supporting the Renminbi’s Medium-Long Term Strength

Looking ahead to 2026, international investment banks are generally optimistic about the Renminbi’s prospects. Behind this optimistic outlook are three core supporting forces:

First, the resilience of export growth continues to play a role. China’s manufacturing sector remains solid in the global supply chain, with relatively strong export growth, providing tangible demand support for the Renminbi. Foreign capital continues to allocate assets in RMB, creating a clear positive impact on the exchange rate.

Second, the structural weakness of the US dollar index has been preliminarily established. In the first half of 2025, the dollar index fell from 109 at the start of the year to around 98, a decline of nearly 10%, marking the weakest first half since the 1970s. Although there was a rebound in November due to easing rate hike expectations, after the Federal Reserve’s rate cut in December, the dollar index fell back to 97.869, returning to the 97.8-98.5 range, showing a weak trend.

Third, steady progress in US-China trade negotiations has alleviated major market uncertainties. In the latest negotiations in Kuala Lumpur, the US side agreed to reduce tariffs on Chinese goods’ fentanyl from 20% to 10%, and temporarily suspended the 24% retaliatory tariffs until November 2026. Both countries also agreed to delay measures such as rare earth export controls and port fees, and to expand US agricultural product purchases. Although these agreements carry risks of setbacks, they have significantly eased trade concerns in the market.

The Optimistic Forecasts of International Investment Banks

Deutsche Bank offers an encouraging analysis. The bank believes the Renminbi has entered a long-term appreciation cycle, estimating 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’s view has attracted market attention. In a medium-term report, Head of Global FX Strategy Kamakshya Trivedi sharply raised the forecast for the next 12 months from 7.35 to 7.0, indicating that the “break 7” level could come sooner than market expectations. Goldman’s logic is that the current real effective exchange rate of the Renminbi is ** undervalued by 12% compared to the ten-year average**, and the undervaluation against the dollar is even greater at 15%. Based on progress in US-China negotiations and the current undervaluation, the Renminbi could reach 7.0 against the dollar within 12 months. Additionally, Goldman Sachs states that China’s strong export performance will continue to support the Renminbi, and that the Chinese government prefers to stimulate the economy through other policy tools rather than relying on currency depreciation.

Should You Allocate Renminbi-Related Currency Pairs Now?

In the short term, the Renminbi is expected to remain relatively strong, generally oscillating inversely with the dollar within a limited range. The possibility of rapid appreciation below 7.0 before the end of 2025 is low, but the upward trend is basically established.

Investing in Renminbi-related currency pairs does present profit opportunities, but key is timing and risk management. Focus on:

• Real-time movements of the US dollar index — which directly influence exchange rate volatility
• Signals from the RMB central parity rate — official attitudes often indicate short-term direction
• The strength and pace of China’s steady growth policies — economic data will influence market expectations adjustments

Four Dimensions to Judge the Future of USD/RMB

1. The Monetary Policy Tightness of the People’s Bank of China

Monetary policy directly impacts money supply and thus exchange rate performance. When the PBOC adopts easing policies (rate cuts, reserve ratio reductions), liquidity is expected to increase, leading to RMB weakness; conversely, tightening (rate hikes, reserve ratio hikes) tends to strengthen the RMB.

Historical evidence supports this logic. In November 2014, the PBOC began a loosening cycle, lowering loan rates six times in a row, and significantly reducing reserve requirements for small and medium financial institutions from 18% to below 8%. During the same period, USD/RMB rose from around 6.x to nearly 7.4, illustrating the profound influence of monetary policy on the exchange rate.

2. The Relative Performance of China’s Economic Data

Strong economic performance attracts sustained foreign capital inflows, boosting demand for RMB; economic slowdown leads to reduced or diverted foreign investment. Key data to watch include:

• Gross Domestic Product (GDP) — quarterly releases, reflecting macroeconomic conditions
• Manufacturing Purchasing Managers’ Index (PMI) — monthly releases, official version focuses on large and medium enterprises, Caixin version on small and medium enterprises
• Consumer Price Index (CPI) — monthly releases, measuring inflation; high inflation may trigger monetary tightening
• Urban Fixed Asset Investment — monthly releases, indicating investment activity scale

3. The USD Trend and Federal Reserve Policy Direction

The rise and fall of the dollar directly determine USD/RMB movements. The Fed’s monetary policy is often the key driver of USD trends. A convincing example is early 2017: strong recovery in the Eurozone economy, GDP growth surpassing the US, and the European Central Bank signaling tightening policies, pushed the euro higher. After the dollar index broke through 100, it weakened sharply, dropping 15% over the year. During the same period, USD/RMB also declined, demonstrating a high correlation.

4. Official Policy Guidance on USD/RMB Exchange Rate

Unlike fully market-driven currencies, the RMB exchange rate is strongly guided by official policies. In the last major revision in May 2017, the RMB central parity rate model was adjusted from “closing price + a basket of currencies” to “closing price + a basket + counter-cyclical factor,” enhancing official guidance for short-term fluctuations. However, in the medium to long term, the overall direction remains determined by market supply and demand.

Five-Year Review: The Cyclical Evolution of USD/RMB

2020 Reversal and Appreciation

At the start of 2020, USD/RMB fluctuated between 6.9 and 7.0. Due to US-China trade tensions and the pandemic, RMB depreciated to 7.18 in May. But as China quickly controlled the pandemic and led economic recovery, and the Fed cut rates to near zero, while the PBOC maintained prudent policies, the widening interest rate differential became the main driver of RMB appreciation. By year-end, RMB rebounded strongly to around 6.50, with an annual appreciation of about 6%.

2021 Narrow Range and Relative Strength

China’s exports remained strong, and the economy improved. The dollar index stayed low, and USD/RMB fluctuated narrowly between 6.35 and 6.58, with an average around 6.45, maintaining relative strength. This year was characterized by RMB stability.

2022 Sharp Depreciation and Cycle Shift

This year, RMB experienced a clear depreciation cycle. USD/RMB rose from 6.35 to over 7.25, a decline of about 8%, the largest in recent years. Causes included aggressive Fed rate hikes boosting the dollar index, China’s strict pandemic policies dragging on the economy, and a worsening real estate crisis undermining market confidence.

2023 Volatility and Continued Low Levels

USD/RMB fluctuated between 6.83 and 7.35, with an average around 7.0, ending slightly higher at 7.1. China’s post-pandemic recovery was weaker than expected, and the ongoing real estate debt crisis continued to weigh on consumption. Meanwhile, high US interest rates kept the dollar index between 100 and 104, exerting persistent pressure on RMB.

2024 Rising Volatility and Changing Expectations

The weakening dollar eased downward pressure on RMB, while fiscal stimulus and real estate support measures in China gradually boosted market confidence. USD/RMB rose from 7.1 to around 7.3 mid-year, with increased volatility. In August, offshore RMB broke through 7.10, reaching a six-month high, prompting markets to reassess RMB prospects.

Offshore Renminbi (CNH) Special Performance

Because CNH trades in international markets like Hong Kong and Singapore with greater freedom and unrestricted capital flows, it better reflects global market sentiment. In contrast, onshore RMB (CNY) is subject to capital controls, with the PBOC guiding the rate through daily fixing and interventions. Therefore, CNH tends to be more volatile than CNY.

The performance of offshore RMB in 2025 warrants close attention. Early in the year, impacted by US tariffs and a soaring dollar index to 109.85, CNH briefly broke 7.36. The PBOC responded with stabilization measures, including issuing 60 billion yuan of offshore bonds to absorb liquidity and stabilizing the fixing.

In the second half, as US-China trade dialogue eased, China’s steady growth policies took effect, and market expectations for Fed rate cuts increased, CNH appreciated significantly. In mid-December, CNH broke through 7.05 against the dollar, rebounding over 4% from the year’s high, reaching a 13-month high.

Overall Judgment

As China enters a sustained easing cycle in monetary policy, USD/RMB has entered a relatively clear medium-term upward trend. Based on past similar policy-driven cycles, this trend could last a decade, with short- and medium-term fluctuations influenced by dollar movements and other events.

As long as investors grasp the four key dimensions affecting RMB trends — monetary policy, economic data, dollar trend, and official guidance — they can greatly improve their forex trading profitability. The forex market is driven mainly by macroeconomic data, which are publicly available and transparent, and with large trading volumes allowing two-way trading, it offers a relatively fair and advantageous investment environment for individual investors.