The RMB's appreciation against the US dollar is heating up. Will it continue to be strong in 2026?

December 25th, the US dollar’s decline against the Chinese yuan accelerated. In the offshore market, the USD/CNH touched 6.9965, the lowest level since September 2024; in the onshore market, the USD/CNY fell to 7.0051, hitting a low since May 2023. This market movement has attracted attention—will the RMB appreciation wave continue into 2026?

Multiple Investment Banks Optimistic About RMB Appreciation

Market sentiment towards the RMB outlook is increasingly optimistic. ANZ senior strategist Xing Zhaopeng expects the USD/CNY to trade within the 6.95-7.00 range in the first half of 2026. Goldman Sachs is even more bullish, believing the RMB is undervalued by 25% relative to economic fundamentals, and forecasts the USD/CNY will fall to 6.90 by mid-2026, further dropping to 6.85 by the end of the year. Bank of America takes a more aggressive stance, expecting that, amid improving US-China relations boosting exporters’ dollar sales, the USD/CNY could dip to 6.80 by the end of 2026.

Current Appreciation Driven by Three Factors

The recent strength of the RMB is not coincidental. Wang Qing, Chief Macro Analyst at Orient Securities, pointed out that the RMB’s appreciation has been driven by a combination of a softening US dollar, central bank policy guidance, and year-end foreign exchange settlement effects.

First, the US dollar’s fundamentals have weakened. Under the dual pressures of the Federal Reserve’s rate cut cycle and accelerated de-dollarization globally, the dollar index has fallen over 10% this year, with a recent decline of more than 2% in the past month, laying the groundwork for RMB’s relative appreciation.

Second, China’s central bank has actively guided the RMB’s appreciation. The People’s Bank of China (PBOC) has continuously raised the midpoint of the RMB exchange rate, signaling clear support for RMB appreciation, a policy stance that is fully reflected in the foreign exchange market.

Third, year-end seasonal factors have played a role. China’s trade surplus in 2025 is substantial, and as many companies settle foreign exchange at year-end, this has created a supply shortage of RMB. Additionally, the PBOC has not further cut policy interest rates this year, and holiday effects have tightened offshore liquidity, all of which have contributed to the RMB’s upward movement.

RMB Still Has Room to Appreciate

It is worth noting that, despite the RMB breaking through psychological barriers, its appreciation potential may not have been fully realized based on fundamentals. Wang Qing emphasized that RMB appreciation significantly enhances China’s capital market attractiveness and helps attract more international capital inflows.

From the perspective of trade-weighted exchange rates and domestic deflation, most analysts believe the RMB is still undervalued. This suggests that, as long as the fundamental support remains intact, there is still a possibility for the RMB to continue appreciating into 2026.

The current market consensus is that the USD/CNY downtrend may become the main theme in 2026, with the specific trajectory depending on US dollar policy directions, Chinese economic data, and the development of US-China relations.