RMB exchange rate breaks psychological barriers! Experts' logic behind the bullish outlook in 2026

The recent performance of the RMB against the US dollar has been impressive. On December 25th, the USD/CNH (offshore RMB) approached 6.9965 again, reaching its best level since September 2024; the onshore RMB (USD/CNY) also touched 7.0051, setting a new record since May 2023.

The Three Main Drivers of RMB Appreciation

This wave of RMB appreciation is not accidental. Market analysis indicates it is mainly driven by three forces.

Overall US dollar weakening is the first key factor. Against the backdrop of the Federal Reserve’s continued rate cuts, the US dollar index has declined by over 10% since the beginning of the year, with a recent one-month drop of more than 2%. The de-dollarization wave is sweeping the globe, significantly weakening the dollar’s purchasing power, which in turn enhances the relative value of the RMB.

Clear central bank policy guidance is the second support. Throughout the year, China’s central bank has continuously raised the midpoint of the RMB exchange rate. By adjusting the reference rate, it signals guidance for RMB appreciation. This policy stance provides institutional backing for the currency’s strength.

Year-end foreign exchange settlement season effect acts as a short-term catalyst. The massive trade surplus accumulated by China in 2025 is concentrated for settlement at year-end. The influx of foreign exchange by export companies has increased demand for the RMB, providing tangible support for the exchange rate’s rise.

Additionally, factors such as the relatively tight monetary policy maintained by the central bank and liquidity tensions during the holiday season have also contributed to the RMB’s appreciation to some extent.

The Significance of RMB Appreciation for the Capital Market

“Continuous RMB appreciation will help enhance China’s capital market attractiveness to foreign investors,” said Wang Qing, Chief Macro Analyst at Dongfang Jincheng. “The weakness of the US dollar and seasonal foreign exchange conversions by exporters are the core drivers of this round of strength.”

This view reflects the positive economic effects of appreciation—when the RMB appreciates, assets denominated in RMB become relatively cheaper, making it easier to attract international capital inflows.

Exchange Rate Trends in 2026: Appreciation Expectations vs. Depreciation Risks

Despite the recent impressive performance of the RMB, various institutions have differing outlooks for 2026.

Some analysts are quite bullish. Goldman Sachs believes the RMB is undervalued by 25% relative to economic fundamentals, expecting USD/CNY to fall to 6.90 by mid-2026 and further to 6.85 by the end of the year. Bank of America predicts that easing US-China relations will promote export expansion, and USD/CNY could fall to 6.80 by the end of 2026.

ANZ Bank’s forecast is relatively moderate, expecting USD/CNY to fluctuate within the 6.95-7.00 range in the first half of 2026.

Investors should note that even though most institutions are optimistic about RMB appreciation, caution is warranted regarding the risks of RMB depreciation. Changes in interest rate differentials, capital flows, geopolitical factors, and other variables could reverse the appreciation trend and exert downward pressure on the RMB.

Overall, the direction of the RMB exchange rate in 2026 will depend on multiple variables, including the strength of the US dollar, the comparative economic fundamentals of China and the US, and policy expectation adjustments.