RMB above 6? Will it continue to rise in 2026?

Breaking news: The USD to CNY exchange rate has fallen below a critical level. On December 25th, the USD to offshore RMB (USD/CNH) dropped to 6.9965, hitting a six-month low; the USD to onshore RMB (USD/CNY) also fell to 7.0051, the lowest level since May 2023. The market generally interprets this as a signal from the central bank hinting at allowing the RMB to gradually appreciate.

Why did the RMB suddenly surge?

A deep dive into this appreciation trend reveals three main drivers:

The first reason is the weakness of the US dollar itself. Amid the Federal Reserve’s rate cuts, the dollar index has fallen over 10% this year, with a recent decline of more than 2% in the past month. The weaker the dollar, the stronger the RMB by comparison—that’s the most straightforward logic.

The second is deliberate guidance from the central bank. The People’s Bank of China (PBOC) has been continuously raising the midpoint rate of the RMB this year, signaling to the market that the RMB is expected to appreciate, thereby guiding market expectations.

The third is the seasonal effect of year-end foreign exchange settlement. In 2025, China’s trade surplus is huge, and as the year-end approaches, exporters are consolidating foreign exchange settlements to convert to USD, which increases demand for the RMB. Additionally, the central bank has not further cut interest rates, and holiday effects have tightened offshore liquidity, all contributing to the RMB’s rise.

Wang Qing, Chief Macro Analyst at Orient Securities, commented: “The core drivers are the weakening dollar and seasonal foreign exchange conversions. Continued RMB appreciation can enhance China’s capital market attractiveness to foreign investors.”

Will the RMB continue to rise in 2026?

Interestingly, although the RMB has already appreciated against the USD, many institutions believe that, based on trade-weighted exchange rates and domestic deflation, the RMB is still undervalued.

ANZ senior strategist Xing Zhaopeng predicts that in the first half of 2026, the USD to RMB exchange rate may stay within the 6.95-7.00 range.

Goldman Sachs has a more aggressive view, estimating that the RMB is undervalued by about 25% relative to its economic fundamentals. They expect the USD to RMB to continue weakening, with a mid-2026 target of 6.90, and by the end of the year, it could fall further to 6.85.

Bank of America is also optimistic, believing that easing US-China relations will improve export prospects, and that the scale of USD selling by Chinese exporters will further increase in 2026. They forecast the USD to RMB to fall to 6.80 by the end of 2026.

In other words, multiple institutions are betting that the probability of the RMB continuing to appreciate next year is quite high.