USD to RMB Exchange Rate Outlook 2026: Is the RMB Appreciation Cycle Really Coming?

Since the beginning of 2025, the USD/CNY exchange rate has experienced a rare strong rebound over the past three years. From the first half of the year when it rose from 7.3 to the recent level of 7.08, what signals are hidden behind this reversal? Is now the right time for investors to allocate to renminbi-related products, or should they continue to wait and see?

What is the current position of the USD/CNY exchange rate?

Overall in 2025, the USD against the CNY has fluctuated between 7.1 and 7.3, with a cumulative appreciation of 2.40% for the year. The onshore market remains relatively stable, while the offshore market is more sensitive, with the offshore RMB versus USD range reaching 7.1 to 7.4, and a higher increase of 2.80%.

Around November 26, driven by easing international relations and adjustments in interest rate trends, the RMB appreciated significantly against the USD, reaching a near one-year high of 7.0765. What does this data imply? Looking back at the trajectory since the “8.11 RMB reform” in 2015, the RMB has never experienced such a sharp reversal in such a short period.

The first half of the year was the most difficult, with offshore RMB falling below 7.40, hitting a new low since 2022. However, in the second half, external conditions improved, with the US dollar index weakening and the RMB gradually stabilizing. What does this indicate? As long as key variables remain stable, the RMB has room to rise.

How has the RMB performed over the past 5 years?

To predict the future, we must first look at the past. The evolution of the USD/CNY exchange rate over the past five years can almost be seen as a complete reflection of China’s economic cycle and global interest rate policies.

During the pandemic (2020-2021): Appreciation phase

In the early pandemic, the RMB was pressured to 7.18, but as China led the control of the pandemic and experienced rapid economic recovery, coupled with the Fed’s significant rate cuts to near zero, the People’s Bank of China maintained a prudent policy, gradually establishing a yield advantage. By the end of 2020, the RMB rebounded strongly to around 6.50, appreciating over 6% for the year. In 2021, performance remained steady, with USD/RMB trading within a narrow range of 6.35 to 6.58, averaging about 6.45, marking a recent period of strength.

Turning point (2022): Devaluation begins

2022 marked a watershed. The Fed’s aggressive rate hikes caused the dollar index to surge, with USD/RMB soaring from 6.35 to over 7.25, depreciating more than 8% for the year — the most intense decline in recent years. Meanwhile, China’s economy faced multiple pressures (strict pandemic controls, real estate crisis), leading to a noticeable decline in market confidence.

Continued pressure (2023-2024): Weakness persists

In 2023, the RMB continued to fluctuate between 6.83 and 7.35, with an average around 7.0. Issues like real estate debt risks and weak domestic demand persisted, and US high interest rate policies remained unchanged. In 2024, conditions slightly improved, with a weakening dollar easing pressure, and liquidity support from the central bank and fiscal stimulus boosting market expectations. However, volatility increased throughout the year, reflecting growing divergence in market views on the RMB’s future direction.

Market consensus: an appreciation cycle may have started

The key question — has the RMB depreciation cycle truly ended?

The industry generally leans toward an optimistic view: the long-standing depreciation cycle that began in 2022 is gradually dissolving, and the RMB is expected to enter a new phase of medium- to long-term appreciation.

Three core reasons support this view:

First, China’s export resilience exceeds expectations. Despite escalating global trade tensions, China’s foreign trade continues to grow, providing solid demand support for the RMB. As long as exports do not stall, the RMB will have a strong foundation.

Second, foreign investment is re-engaging with RMB assets. After three years of adjustment, RMB asset prices have become attractive, prompting international investors to reallocate, which will continue to push the RMB higher.

Third, a structural weakening of the US dollar has become a consensus. Expectations of Fed rate cuts are rising, and the European Central Bank is adjusting policies as well. It’s increasingly difficult for the dollar index to maintain strength. A weaker dollar = a stronger RMB, and this trend will become more evident in 2025.

Based on these factors, several international investment research institutions have expressed positive expectations: some believe the USD/CNY exchange rate could appreciate to around 7.0 by the end of 2025, and further strengthen to between 6.7 and 7.05 by the end of 2026. This implies a 3-5% appreciation potential relative to current levels.

Four key variables influencing the USD/CNY exchange rate

Forecasting is never a simple straight line. To truly grasp the USD/CNY trend, one must constantly monitor the following four variables:

1. Will the US dollar index continue to weaken?

In the first five months of 2025, the dollar index has already fallen by 9%, marking the worst start in history. Market expectations suggest the Fed will initiate a rate cut cycle, with short-term interest rates already trending downward. But the key questions are: how large will the rate cuts be? The Fed signaled potential rate cuts in the second half of 2024, but actual implementation depends on inflation data and employment performance. If inflation remains stubbornly high, the Fed may slow down rate cuts, increasing the risk of a dollar rebound.

2. When will US-China trade negotiations truly materialize?

Historically, US-China negotiations have been cyclical, with agreements often breaking down quickly. Although the current atmosphere appears more relaxed, the durability remains uncertain. If negotiations remain deadlocked for a long time, tariff uncertainties will continue to suppress the RMB. Conversely, a substantive agreement would open up room for RMB appreciation.

3. Will the People’s Bank of China continue to adopt an easing monetary policy?

Currently, China’s central bank favors easing to support economic recovery. Rate cuts, reserve requirement ratio reductions, and liquidity measures may occur, which in the short term could exert downward pressure on the RMB. However, in the medium to long term, if easing policies are coupled with strong fiscal stimulus leading to economic stabilization, the RMB fundamentals will strengthen, ultimately boosting the exchange rate.

4. How is the internationalization of the RMB progressing?

The RMB’s share in global trade settlement continues to rise, and the scope of currency swap agreements is expanding — all positive long-term factors. However, given that the USD remains the primary reserve currency, the short-term space for RMB internationalization to grow is limited.

How should investors judge the future of the RMB?

Rather than blindly predicting, it’s better to understand the methods of judgment. Professional investors typically consider the following:

Pay close attention to central bank policy signals

The central bank’s monetary policy directly influences RMB supply expectations. Easing (rate cuts, reserve ratio reductions) → upward pressure on RMB depreciation; tightening (rate hikes, reserve ratio increases) → RMB appreciation. The 2014 series of rate cuts and large reserve requirement reductions led to USD/RMB rising from 6 to 7.4, illustrating the power of policy.

Also, monitor the RMB/USD midpoint quotes. After the PBOC introduced the “counter-cyclical factor” in 2017, the midpoint became a tool to guide market expectations. Observing its trend can often pre-empt official stance shifts.

Keep an eye on Chinese economic data

When China’s economy grows steadily and outperforms other emerging markets, foreign capital flows in, increasing RMB demand and pushing the exchange rate higher. Conversely, economic slowdown leads to capital outflows.

Key economic indicators include: GDP (macro outlook), PMI (manufacturing and services activity), CPI (inflation, affecting monetary policy), and fixed asset investment (economic vitality).

The US dollar index as a “truth mirror”

The USD and RMB often move inversely. Fed policies, US economic data, and international events influence the dollar, which in turn impacts USD/CNY. For example, in 2017, European economic recovery outpaced the US, and the ECB signaled tightening, causing the dollar index to fall 15% for the year, with USD/RMB weakening correspondingly — a correlation exceeding 90%.

A simple approach is: Keep an eye on the dollar index, and you can generally grasp the RMB exchange rate trend.

Is now a good time to buy RMB?

Frankly, the probability of RMB appreciation in the short term is relatively high, but with an important caveat: “short-term.”

Based on current factors, RMB is expected to remain relatively strong in the short term (next 3-6 months), with fluctuations inversely correlated to the dollar. However, quickly dropping below 7.0 is challenging. The likelihood of achieving this before the end of 2025 is low; a more realistic expectation is gradual appreciation into 2026.

From an investment perspective, entering RMB-related currency pairs now to profit from price differences is feasible, but only if you:

• Recognize this as a medium-term allocation, not short-term speculation
• Implement proper risk management and set stop-loss points
• Closely monitor the four key variables, and be ready to adjust decisively if sudden changes occur (e.g., US-China negotiations break down, Fed halts rate cuts)

Summary

The RMB exchange rate is at a critical historical juncture. The three-year depreciation cycle that began in 2022 is indeed easing. Supported by steady Chinese exports, a structurally weaker dollar, and re-engagement of foreign capital, the RMB appreciation outlook is gradually taking shape.

But appreciation does not mean a straight upward trajectory; it will advance slowly amid volatility. Investors who focus on central bank policies, economic data, and the dollar trend, along with observing official exchange rate policies, can secure relatively certain gains during this RMB appreciation cycle.

The main driving factors in the forex market are macroeconomic, with transparent public data, ample liquidity, and a well-established two-way trading mechanism, making it relatively fair for ordinary investors. The key is to clarify your investment horizon and risk tolerance, rather than blindly jumping in at high levels.

The RMB appreciation cycle has begun, but the key to smart investing is to act when it’s time to act, and wait when it’s time to wait.