Will the RMB still appreciate in 2026? Multiple investment banks provide answers, and the dollar's depreciation trend may intensify

The RMB against the US dollar has recently hit a new high, with multiple international investment banks rushing to voice their predictions for the future market. Interestingly, a consensus has already formed in the market regarding the appreciation of the RMB, with the main difference being “how much” it will appreciate.

What Does Breaking the 7 Psychological Level in the Exchange Rate Mean?

On December 25th, the offshore USD to RMB exchange rate fell to 6.9965, marking the first time since September 2024 that it has dipped below the critical level of 7. On the same day, the onshore USD to RMB also fell to 7.0051, hitting a new low since May 2023. What does this number reflect?

Market analysis generally believes that the current strength of the RMB is not accidental but the result of multiple factors resonating. First, the US dollar index has fallen more than 10% this year, with a decline of over 2% in the past month. Under the Fed’s rate cut cycle and the global de-dollarization wave, the US dollar is under significant pressure. Second, the People’s Bank of China (PBOC) has been continuously adjusting the midpoint rate, signaling a policy stance of RMB appreciation to the market. Third, the year-end foreign exchange settlement effect is also playing a role—China’s massive trade surplus is converting into foreign exchange cash, providing seasonal support for the RMB.

Additionally, the central bank has not further cut interest rates in the short term, and tighter offshore liquidity due to the holiday season may also contribute to pushing up the RMB. Wang Qing, Chief Macro Analyst at Orient Securities, pointed out, “The weakening of the US dollar and seasonal foreign exchange conversions by exporters have driven the RMB stronger. This round of appreciation will enhance the attractiveness of China’s capital markets to foreign investors.”

How Do Investment Banks View the RMB Outlook for 2026?

Although the RMB has hit a new low, most analysts believe there is still room for appreciation. The key issue is that, from the perspective of trade-weighted and inflation-adjusted measures, the RMB remains undervalued.

Xing Zhaopeng, Senior Strategist at ANZ Bank, stated that in the first half of 2026, the USD to RMB may fluctuate between 6.95 and 7.00. Goldman Sachs has a more optimistic view on the RMB—believing that the RMB is undervalued by about 25% relative to its fundamentals, and expects the USD to RMB to fall to 6.90 by mid-2026, further dropping to 6.85 by the end of the year.

Bank of America takes the most aggressive stance. The bank believes that the improvement in US-China relations will benefit Chinese exporters, and expects these exporters to increase USD selling in 2026, pushing the USD to RMB exchange rate down to 6.80 by year-end. This implies that the RMB still has about a 3% appreciation potential against the US dollar.

Policy Implications Behind the RMB Appreciation

RMB appreciation is not just a change in exchange rate figures but also reflects the policy adjustment direction of the Chinese central bank. By actively guiding the RMB to appreciate, the central bank is essentially sending a signal—that in the current economic environment, allowing the RMB to strengthen helps to: stabilize foreign exchange market expectations, attract long-term capital inflows; enhance export competitiveness while promoting imports and consumption; and improve the international recognition of the RMB.

From a broader perspective, if the RMB’s appreciation trend can be maintained, it will positively promote the internationalization of China’s capital markets and align with the long-term strategy of RMB internationalization.