Full Analysis of the 2026 RMB Exchange Rate Trend: Is It Still Profitable to Enter RMB Trading Now?

Current RMB Exchange Rate Outlook

The performance of the RMB in 2025 has been quite volatile. After three consecutive years of depreciation from 2022 to 2024, the RMB finally reversed its downward trend this year. As of late November, driven by positive factors such as improved China-U.S. trade relations and rising expectations of Fed rate cuts, the RMB against the US dollar appreciated to below 7.08, even reaching 7.0765 at one point, hitting a recent high.

Looking at the full-year performance, the USD to RMB exchange rate fluctuated between 7.1 and 7.3, appreciating a total of 2.40%; the offshore market experienced even larger swings, oscillating between 7.1 and 7.4, with a total appreciation of 2.80%, reflecting that offshore RMB is more sensitive to international factors.

In the first half of the year, global trade policy uncertainties and a strengthening US dollar index temporarily suppressed the RMB. Offshore RMB once fell below 7.40, and the USD to RMB exchange rate hit a historic high since the 2015 “8.11 reform.” However, in the second half, as China-U.S. trade negotiations steadily advanced and the dollar index weakened, the RMB exchange rate began to recover, with market sentiment gradually stabilizing.

Is There Still an Opportunity to Invest in RMB Trading?

Brief answer: Yes, but the key is to choose the right timing.

In the short term, the RMB is expected to maintain a relatively strong stance, generally fluctuating within a range that moves inversely to the US dollar with limited volatility. The market does not expect a rapid decline below 7.0 before the end of 2025.

Going forward, three major variables should be closely monitored: the direction of the US dollar index, signals from the RMB midpoint rate adjustments, and the implementation of China’s growth stabilization policies.

RMB Historical Exchange Rate Review: The Trajectory of the Past 5 Years

To understand the future, we must examine the past. The USD to RMB exchange rate over the last five years clearly shows three phases:

2020 Appreciation Period
Early in the year, the rate hovered between 6.9 and 7.0. Due to China-U.S. trade frictions and pandemic shocks, the RMB depreciated to 7.18 in May. But as China quickly controlled the pandemic and economic recovery outpaced others, coupled with the Fed’s significant rate cuts to near zero while China maintained prudent policies, the widening interest rate differential supported a strong rebound for the RMB, ending the year near 6.50, appreciating about 6% for the year.

2021 Strong Period
China’s exports remained robust, the economy improved, and the central bank maintained stable policies, with the dollar index at low levels. The USD to RMB traded narrowly between 6.35 and 6.58, averaging around 6.45 for the year, with the RMB maintaining relative strength.

2022 Depreciation Period
This year, USD to RMB surged from 6.35 to over 7.25, with an annual depreciation of about 8%, the largest in recent years. Aggressive Fed rate hikes pushed the dollar index higher; meanwhile, China’s strict pandemic policies hampered economic growth, and a worsening real estate crisis dampened market confidence.

2023 Continued Pressure
USD to RMB traded between 6.83 and 7.35, averaging about 7.0, ending the year slightly higher at 7.1. China’s post-pandemic economic recovery fell short of expectations, real estate debt issues persisted, and consumption remained sluggish; the US maintained high interest rates, with the dollar index at 100–104, keeping the RMB under pressure.

2024 Rebound Period
A weakening dollar eased pressure on the RMB, with fiscal stimulus and support policies for real estate boosting confidence. The exchange rate rose from 7.1 to around 7.3 mid-year, offshore RMB broke through 7.10 in August to reach a six-month high, with volatility increasing significantly.

RMB Outlook for End-2025 to 2026

The market generally believes that RMB is at a turning point in its cycle. The depreciation cycle that began in 2022 may have ended, and the RMB is expected to enter a new phase of medium- to long-term appreciation.

Three key factors support this view:

First, China’s export resilience continues
Despite complex global trade conditions, China’s exports remain relatively strong, providing fundamental support for the RMB.

Second, foreign capital re-allocates into RMB assets
As expectations of the end of the RMB depreciation cycle strengthen, international investors are reconsidering increasing their RMB holdings. This structural change will support the RMB over the long term.

Third, the structural weakness of the US dollar index
The Fed’s rate cut cycle signals a potential long-term depreciation of the dollar, which in turn supports the appreciation of Asian currencies, including the RMB.

Consensus Forecasts from International Investment Banks

Several top global investment banks are optimistic about the RMB outlook:

Deutsche Bank notes that the recent strengthening of the RMB against the dollar may signal the start of a long-term appreciation cycle. The bank forecasts the RMB will appreciate to 7.0 by the end of 2025 and further to 6.7 by the end of 2026.

Morgan Stanley also expects a moderate appreciation, believing the dollar will weaken continuously over the next two years. They project the dollar index could fall to 89 by 2026, with the RMB/USD exchange rate reaching around 7.05.

Goldman Sachs, in a May report, unexpectedly revised its 12-month USD to RMB forecast upward from 7.35 to 7.0. Goldman Sachs pointed out that the current real effective exchange rate of the RMB is undervalued by 12% relative to the ten-year average, with an even greater undervaluation against the dollar at 15%. Based on progress in China-U.S. trade negotiations and the RMB’s undervaluation, the RMB is expected to appreciate to 7.0 in the next 12 months, with a 3-month target of 7.2 and a 6-month target of 7.1.

Goldman Sachs also emphasized that China’s strong export performance will continue to support the RMB, and that the Chinese government is more likely to use other policy tools to stimulate the economy rather than devalue the currency.

Core Factors Influencing USD to RMB Exchange Rate Trends

Understanding exchange rate movements requires considering both external and internal factors:

External factors: Fluctuations in the US dollar index and changes in international trade policies are primary drivers.

Internal factors: Market expectations and foreign exchange policy guidance are crucial, with the RMB midpoint rate acting as a “balancing indicator.”

Detailed Analysis of Factors

USD Index Trends
In the first five months of 2025, the dollar index fell by 9%, marking the worst start to the year historically. Widespread market expectations suggest that the Fed’s upcoming rate cut cycle will lower short-term rates, and the dollar may depreciate further over the next 12 months. This implies that Asian currencies, including the RMB, could continue to appreciate.

China-U.S. Trade Relations
Although there are signs of easing, the durability of this détente remains uncertain. Past similar agreements have often broken down quickly. Therefore, trade negotiations and tariffs remain key variables affecting USD to RMB exchange rates. If negotiations ease tensions, the RMB will be supported; if tensions escalate, depreciation pressures will persist.

Federal Reserve Monetary Policy
The Fed’s policy is critical for the dollar’s trajectory. In late 2024, the Fed signaled a pause or potential rate cuts, but the magnitude and timing in 2025 will depend on inflation, employment data, and government policies. If inflation remains above target, the Fed may slow or halt rate cuts to support the dollar; if the economy slows significantly, rate cuts could accelerate, weakening the dollar. The RMB and dollar index tend to move inversely.

People’s Bank of China Policy
China’s monetary policy leans toward easing to support economic recovery, especially amid weak real estate and sluggish domestic demand. The central bank may cut interest rates or reserve requirements, which generally exerts downward pressure on the RMB. However, if easing is combined with strong fiscal stimulus that stabilizes the economy, the long-term effect could be RMB appreciation.

RMB Internationalization Process
The increasing use of RMB in global trade settlements and currency swap agreements with other countries may support RMB stability over the long term. However, in the short term, the dollar’s status as the primary reserve currency remains dominant.

How to Judge the Future Direction of RMB Exchange Rate?

By considering the following four dimensions, investors can independently assess RMB trends and respond flexibly to market changes:

1. People’s Bank of China Monetary Policy Orientation

The central bank’s stance directly influences money supply and thus the exchange rate. Easing policies (rate cuts, reserve requirement reductions) tend to weaken the RMB; tightening policies (rate hikes, reserve increases) tend to strengthen it.

A typical example is 2014–2015: the PBOC cut rates six times and significantly reduced reserve requirements, lowering the reserve ratio for small and medium financial institutions from 18% to below 8%. During this period, the USD to RMB rate rose from 6 to nearly 7.4, demonstrating the long-term impact of monetary policy.

2. China Economic Data Performance

When the economy grows steadily and outperforms other emerging markets, it attracts sustained foreign investment, increasing demand for the RMB and strengthening it. Conversely, economic slowdown or reduced attractiveness leads to decreased foreign investment and RMB demand.

Key indicators to watch include:

• GDP: Released quarterly, reflecting macroeconomic health
• Purchasing Managers’ Index (PMI): Monthly releases from official and Caixin sources; official focuses on large and medium enterprises, Caixin on small and medium enterprises
• Consumer Price Index (CPI): Monthly, measuring inflation and economic heat
• Urban Fixed Asset Investment: Monthly, indicating investment activity

3. USD Index Trends

The USD’s movement directly determines USD to RMB fluctuations. The policies of the Fed and the European Central Bank are often key drivers.

For example, in 2017, the Eurozone’s economy recovered strongly, with GDP growth surpassing the US, and the European Central Bank signaled tightening. The dollar index fell by 15% that year. Simultaneously, USD to RMB also declined significantly, showing a high correlation.

4. Official Guidance on Exchange Rate

As a managed floating exchange rate system, the RMB’s official guidance plays an important role. On May 26, 2017, the PBOC revised the RMB/USD midpoint quoting model from “closing price + a basket of currencies exchange rate change” to “closing price + a basket of currencies exchange rate change + countercyclical factor,” strengthening guidance.

However, recent trends show that official guidance has a more immediate impact on short-term rates, while the medium- to long-term trend is mainly determined by the overall direction of the currency markets.

Main Channels for Investors to Invest in RMB

Commercial and International Banks
Investors can open foreign exchange accounts at local or international banks for FX trading and investment.

Foreign Exchange Trading
Trade on regulated FX platforms, which typically offer online trading tools supporting both long and short positions, with some offering leverage to amplify exposure. Leverage allows smaller capital to control larger positions but increases risk, requiring proper risk management.

Securities Firms
Some securities companies provide FX trading services, allowing investors to buy and sell foreign exchange on their designated platforms.

Futures Exchanges
Investors can open accounts at futures exchanges to trade FX futures.

Summary

As China enters a cycle of monetary easing, the USD to RMB exchange rate has experienced a clear trend reversal. Based on historical experience, such cyclical changes can last for about a decade, with short- and medium-term fluctuations influenced by USD movements and other events, but the overall direction remains relatively certain.

By grasping the core factors influencing RMB trends outlined above, investors can significantly improve their chances of profit. The FX market is driven by macro factors, with transparent economic data from various countries, large trading volumes, and support for two-way trading, making it relatively fair and advantageous for individual investors. The key is to develop your own analytical framework rather than blindly follow the crowd.