RMB Exchange Rate Trend: A 5-Year In-Depth Review | Will It Continue to Appreciate in 2026? How Should Investors Strategize

Five-Year Review: The Rollercoaster of the Renminbi from Appreciation to Depreciation and Reversal

To judge the future trend of the Renminbi exchange rate, we first need to understand what it has experienced over the past five years.

2020 Pandemic Impact, Renminbi Strengthens Against the Trend

At the onset of the pandemic, the USD to RMB exchange rate hovered between 6.9 and 7.0. However, as China quickly contained the pandemic and led a rapid recovery, coupled with the Federal Reserve’s aggressive rate cuts to near-zero, the interest rate differential favored the Renminbi. By the end of the year, the exchange rate rebounded strongly to around 6.50, appreciating about 6% for the year.

2021 Export Boom, Renminbi Maintains High Levels

China’s exports grew strongly, with clear positive economic expectations, and the central bank maintained a prudent policy stance. Meanwhile, the US dollar index was weak, with USD to RMB fluctuating narrowly between 6.35 and 6.58, averaging around 6.45 for the year, marking one of the strongest periods for the Renminbi in recent years.

2022 Federal Reserve’s Aggressive Rate Hikes, Renminbi Depreciates Sharply

This year saw the greatest volatility. Facing high inflation, the Fed launched an aggressive rate hike cycle, causing the dollar index to soar. USD to RMB rose from 6.35 to over 7.25, depreciating about 8% for the year, the largest decline in recent years. Domestically, a worsening real estate crisis, strict pandemic controls, and slowing economic growth significantly dampened market confidence.

2023 End of the Downward Trend, Renminbi Under Pressure

The USD index continued to operate at high levels between 100-104, putting pressure on the Renminbi. USD to RMB fluctuated between 6.83 and 7.35 throughout the year, slightly rising to around 7.1 at year-end. China’s economic recovery fell short of expectations, with unresolved real estate issues and weak consumer demand, leaving the Renminbi with little upward momentum.

2024 Policy Stimulus Emerges, Renminbi Rebounds from the Bottom

With China implementing a series of fiscal stimulus measures and real estate support policies, market sentiment began to shift. The USD index also retreated from highs, with USD to RMB rising from 7.1 at the start of the year to 7.3 mid-year. In August, offshore RMB briefly broke through 7.10, hitting a new high for the second half of the year. Market volatility increased significantly, reflecting changing investor sentiment.

What Is the Current Position of the Renminbi? Key Turning Points Have Emerged

Entering 2025, the Renminbi exchange rate has undergone a clear qualitative change.

According to the latest data, at the beginning of the year, USD to RMB fluctuated bidirectionally between 7.04 and 7.3. In the first half, influenced by global tariff policy uncertainties and a strengthening dollar index, offshore RMB briefly broke below 7.40, setting a new record since the 2015 “8.11 Reform.” Market pessimism about the Renminbi’s outlook peaked.

However, the trend reversed in the second half. As China-US trade negotiations made progress and the dollar index weakened, the Renminbi began to stabilize. On December 15, following the Fed’s rate cut announcement, USD to RMB surged past 7.05, reaching as high as 7.0404—the highest in nearly 14 months.

This signal is significant—it may indicate that the depreciation cycle starting in 2022 has officially ended, and the Renminbi is poised to enter a new appreciation phase.

Four Core Factors Driving the Renminbi’s Appreciation

1. The USD Index Shifting from Strength to Weakness

In the first half of 2025, the dollar index declined from 109 at the start of the year to 98, a drop of nearly 10%. In November, due to market expectations of a slowdown in Fed rate cuts, the dollar rebounded above 100. But in December, as the Fed’s rate cuts materialized, the dollar index fell again, reaching a low of 97.869, settling in the 97.8-98.5 range.

A weaker dollar naturally supports the Renminbi, making it the most direct driver of exchange rate movements.

2. US-China Negotiations Shift from Confrontation to Cooperation

The latest round of US-China trade talks reached a ceasefire consensus— the US will reduce tariffs on Chinese goods containing fentanyl from 20% to 10%, and the 24% retaliatory tariffs will be suspended until November 2026. Both countries agreed to temporarily halt rare earth export controls and expand purchases of US agricultural products.

Although past agreements have sometimes fallen apart at the last minute, this current situation creates a relatively stable external environment for the Renminbi. As long as negotiations remain stable, market sentiment is likely to continue improving.

3. China’s Steady Economic Growth Policies Show Effect

Fiscal stimulus measures and real estate support policies have been introduced, and markets are beginning to believe that the Chinese government is willing and able to stabilize the economy. This will attract foreign capital to reallocate into Renminbi assets, increasing demand for the currency.

4. The Renminbi’s Undervaluation Repair Mechanism Is Activated

International investment banks estimate that the real effective exchange rate of the Renminbi is undervalued by about 12% relative to the ten-year average, with an even larger undervaluation of 15% against the US dollar. This undervaluation inherently contains the potential for appreciation, and the market will eventually correct this imbalance.

How Do Major Investment Banks View the Renminbi’s Trend in 2026?

Deutsche Bank: Targeting 6.7

The bank believes the Renminbi is entering a long-term appreciation cycle. It forecasts USD to RMB will rise to 7.0 by the end of 2025 and further appreciate to 6.7 by the end of 2026.

Goldman Sachs: Breaking 7 Faster Than Expected

Kamakshya Trivedi, head of Goldman Sachs’ global FX strategy, states that based on the current undervaluation of the Renminbi and progress in US-China trade negotiations, the USD to RMB rate is expected to reach 7.0 within the next 12 months. Goldman’s logic is that China’s strong export performance will continue to support the Renminbi, and the Chinese government prefers using fiscal tools rather than depreciation policies to stimulate the economy.

Three Key Variables to Watch That Will Impact the Renminbi Exchange Rate

Despite the optimistic outlook, investors should remain alert to potential variables:

1. USD Index Trends—If the Fed unexpectedly pauses rate cuts or shifts to rate hikes, the dollar could rebound, directly impacting the Renminbi’s appreciation process.

2. Signals from the RMB Central Parity Rate—The People’s Bank of China increasingly guides the exchange rate through daily central parity quotes. If the official stance changes, short-term trends could reverse.

3. The Effectiveness of China’s Steady Growth Policies—If economic stimulus measures fall short of expectations, market confidence could waver, weakening foreign capital inflows.

Practical Investment Guide: When to Buy the Renminbi

Short-term Expectation: Mild Appreciation with Limited Range

It is unlikely that the Renminbi will quickly fall below 7.0 before the end of 2025. In the short term, the currency is expected to remain relatively strong but fluctuate within a range, moving inversely to the dollar, with limited amplitude.

Medium-term Opportunity: Focus on Official Attitudes

The People’s Bank of China’s stance is crucial. If the central bank continues to guide the Renminbi to strengthen and adopts accommodative monetary policies, multiple positive factors will align. Conversely, if the stance shifts, the appreciation outlook could be undermined.

Long-term Logic: Policy Cycles Could Last a Decade

Historical experience suggests that policy-driven exchange rate cycles can last around ten years. Once the Renminbi enters an appreciation trajectory, medium-term investment opportunities will be quite attractive. Short-term fluctuations are normal market behavior.

Final Words

The Renminbi’s trend has shifted from the 2022 unilateral depreciation to a 2025 reversal and recovery. Whether looking at the USD index, US-China relations, policy expectations, or capital flows, the Renminbi is at a critical turning point.

For investors, the key is not to chase highs or be overly bearish, but to monitor the four core factors’ changes and gradually build positions under stable policies and improving external conditions. As long as the macro trend is captured, the forex market—due to its large trading volume and two-way operation—often offers easier profit opportunities than the stock market.