The RMB to USD exchange rate drops below 7! How should investors view the trend in 2026?

The recent performance of the RMB against the US dollar has been eye-catching. On December 25, the USD/CNH (offshore RMB) fell to 6.9965, hitting a new low since September 2024; the USD/CNY (onshore RMB) dropped even further to 7.0051, marking the lowest level since May 2023. Breaking through this important threshold indicates that the RMB’s appreciation trend is gradually strengthening.

The Three Forces Behind the RMB to USD Exchange Rate Changes

The current RMB appreciation is not accidental. Market analysis suggests that this wave of appreciation is driven by three major factors.

First is the weakening of the US dollar itself. Driven by the Federal Reserve’s continued rate cuts and the global de-dollarization trend, the US dollar index has fallen over 10% this year; in the past month, the decline has exceeded 2%. The dollar’s depreciation directly benefits the RMB exchange rate performance.

Second is the policy guidance from the central bank. The People’s Bank of China (PBOC) has been raising the midpoint of the RMB exchange rate throughout the year, guiding market expectations of RMB appreciation through continuous improvements in the official reference rate. This prudent policy support has created a favorable institutional environment for RMB appreciation.

The third boost comes from year-end foreign exchange settlement effects. As the trade surplus for 2025 continues to accumulate, companies engage in large-scale foreign exchange settlement operations near the year’s end, and this seasonal foreign exchange demand further pushes up the RMB exchange rate.

Dongfang Jincheng’s chief macro analyst pointed out that the combination of a weak US dollar and seasonal foreign exchange conversions by exporters has driven the RMB’s strength. More importantly, the ongoing RMB appreciation is expected to attract more foreign capital inflows into China’s capital markets, enhancing the market’s international competitiveness.

Divergent Institutional Expectations for the RMB to USD Exchange Rate in 2026

Although the RMB’s appreciation momentum is strong at present, there are clear differences among institutions regarding its direction in 2026.

From a fundamental perspective, most analysts believe the RMB still has room to appreciate. Based on trade-weighted indices and China’s inflation outlook, the RMB is considered seriously undervalued, providing a foundation for further appreciation.

Goldman Sachs holds the most aggressive view. The firm believes the RMB is undervalued by 25% relative to economic fundamentals and expects the USD/CNY to fall to 6.90 by mid-2026, further dropping to 6.85 by the end of the year.

Bank of America is more optimistic about the RMB’s upward trend. Considering that easing US-China tensions improve the prospects for Chinese exporters, the bank forecasts that by 2026, the scale of USD selling by Chinese exporters will increase, ultimately predicting the USD/CNY to fall to 6.80 by year-end.

ANZ Bank adopts a relatively conservative stance, expecting the USD/CNY to remain within the 6.95-7.00 range in the first half of 2026, implying that the exchange rate may face some adjustment pressure.

Overall, whether aggressive or conservative, most institutions are optimistic about the RMB continuing to appreciate in 2026, which brings relatively favorable expectations for investors in RMB to USD conversions.