The RMB appreciation drama continues, can it still rise in 2026?

The appreciation of the RMB against the US dollar in 2026 has become a hot topic in the market. Several international major banks have provided predictions with considerable imagination—Goldman Sachs expects the USD to RMB exchange rate to fall from 6.90 mid-year to 6.85 by the end of the year, while Bank of America’s outlook is more aggressive, even seeing the possibility of 6.80. What do these numbers reflect? Is it really achievable?

The story behind the current exchange rate breaking psychological barriers

RMB appreciation is not a recent phenomenon. Since September 2024, this wave of appreciation has been brewing, and by December 25, it finally broke the long-anticipated 7 mark—the USD to offshore RMB (USD/CNH) fell to 6.9965, hitting a 9-month low; the USD to onshore RMB (USD/CNY) dropped to 7.0051, the strongest performance since May 2023.

Three forces are driving this upward trend. First, the US dollar itself has weakened. Since the beginning of this year, the dollar index has fallen over 10%, and in the past month, it has dropped more than 2%, which is particularly evident against the backdrop of Fed rate cuts and global de-dollarization. Second, the People’s Bank of China (PBOC) has taken an active guiding stance, continuously raising the midpoint of the RMB exchange rate throughout the year, signaling support for RMB appreciation. The third factor is the seasonal characteristic at year-end—China’s trade surplus in 2025 was huge, and as the year-end approaches, companies are converting foreign exchange, which technically boosts RMB appreciation.

Why is this appreciation worth paying attention to

Wang Qing, Chief Macro Analyst at Dongfang Jincheng, commented intriguingly: “The weakening dollar and seasonal foreign exchange conversions by exporters have driven the RMB stronger. Continued RMB appreciation will help enhance the attractiveness of China’s capital markets to foreign investors.” This is not just a technical change but could also alter the pattern of capital flows.

It is worth noting that the central bank has maintained restraint in its monetary policy—no further rate cuts throughout the year—and the tight liquidity during the holiday season has also supported the RMB from another perspective. Such a resonance of multiple factors is uncommon.

How much room is there for appreciation in 2026

From the perspective of trade-weighted indices and economic fundamentals, many analysts believe that the RMB still has room to be undervalued. Goldman Sachs’s assessment is straightforward: the RMB is undervalued by 25% relative to economic fundamentals. Based on this logic, appreciation is justified.

ANZ Bank’s senior strategist Xing Zhaopeng offers a relatively conservative forecast, expecting USD to RMB to fluctuate within the range of 6.95-7.00 in the first half of 2026. Meanwhile, Bank of America is more optimistic about the RMB, expecting that easing US-China tensions will improve export prospects, and the scale of USD selling by exporters in 2026 will further expand, ultimately pushing the USD to RMB down to 6.80 by the end of the year.

How should investors view this

Of course, while these predictions are supported by data, exchange rate fluctuations involve multiple variables, including international political situations, trade policy changes, and shifts in global capital flows. For investors, the key is to understand the logic behind these trends: RMB appreciation reflects China’s relatively stable economic fundamentals and also hints at considerations about the performance of other currencies like the Australian dollar—in an environment of diverging global monetary policies, the relative appreciation and depreciation among different currencies are reshaping.

Whether the RMB will continue to appreciate in 2026 depends not only on whether the US dollar remains weak but also on the policy orientation of the Chinese central bank and how the global trade landscape evolves.