The RMB is strengthening rapidly; will the USD to RMB exchange rate fall further by 2026?

Institutions Are Turning Bullish on the Renminbi

Recently, predictions about the Renminbi exchange rate have been quite interesting. Major financial institutions like Goldman Sachs, Bank of America, and ANZ Bank are betting on a continued appreciation of the Renminbi. Among them, Goldman Sachs is the most aggressive, believing that the Renminbi is seriously undervalued relative to economic fundamentals—by as much as 25%.

According to Goldman Sachs’ estimates, the mid-2026 USD to RMB exchange rate could fall to 6.90, and by the end of the year, it could even drop to 6.85. Bank of America expects a more optimistic scenario; with the improvement of US-China trade relations, the USD to RMB rate could fall to 6.80 by the end of 2026. ANZ Bank’s view is relatively conservative, suggesting that in the first half of 2026, the exchange rate may fluctuate within the 6.95-7.00 range.

Three Major Drivers Behind RMB Breaking Through 7

The recent wave of RMB appreciation has been quite remarkable. On December 25, the USD/CNH (offshore RMB) exchange rate dropped to 6.9965, hitting a new low since September 2024. The onshore USD/CNY also fell to 7.0051, marking the first time since May 2023 that it broke this psychological barrier.

What are the main reasons behind this round of appreciation? Analysts point to three key factors.

First, the overall weakness of the US dollar. Under the Federal Reserve’s rate cut cycle and the de-dollarization trend, the US dollar index has fallen more than 10% this year, with a decline of over 2% in the past month alone. The dollar’s depreciation naturally creates room for the RMB to appreciate.

Second, the People’s Bank of China (PBOC) actively guided the RMB to appreciate. By continuously adjusting the midpoint of the exchange rate (the reference rate), the central bank has signaled support for RMB appreciation, and this policy orientation has had a clear guiding effect on the market.

Third, year-end foreign exchange settlement demand has provided additional momentum. The massive trade surplus accumulated by China in 2025 was concentrated into settlement needs at year-end, boosting demand for RMB through foreign exchange conversions by export companies.

Additionally, the PBOC’s pause on further rate cuts and the liquidity tightening in the offshore market due to holiday effects have also contributed to supporting the RMB’s rise.

The Deep Logic Behind the Appreciation

From market reactions, the outlook for RMB appreciation is generally optimistic. Wang Qing, Chief Macro Analyst at Dongfang Jincheng, pointed out that the weakness of the US dollar and the seasonal foreign exchange conversions by exporters have jointly driven the RMB’s strength. This appreciation trend will help enhance China’s capital market attractiveness to foreign investors.

Interestingly, despite the RMB already falling below 7, many industry insiders believe that, based on trade-weighted exchange rates and China’s economic fundamentals, the RMB still has room for undervaluation. This judgment provides logical support for continued appreciation into 2026.

With the gradual easing of US-China relations and improved trade prospects, the scale of USD selling by export enterprises may further expand, continuing to support RMB appreciation. Therefore, the goal of the USD/RMB exchange rate falling below 6.90 and even 6.80 by 2026 is not considered impossible by many institutions.