Is the US dollar appreciating or depreciating against the Chinese yuan? 2025 End-of-Year RMB Exchange Rate Forecast and Investment Guide

Will the Renminbi Continue to Appreciate? Predictions from Multiple Banks

By the end of 2025, the Renminbi faces a critical juncture. According to the latest forecasts from several international investment banks, the USD/CNY exchange rate may be at a long-term turning point.

Goldman Sachs’s perspective is particularly noteworthy. Its Global Foreign Exchange Strategist Kamakshya Trivedi pointed out in a report that the real effective exchange rate of the Renminbi is undervalued by 12% compared to the ten-year average, with an undervaluation against the US dollar of up to 15%. Based on this, Goldman Sachs predicts that the USD/CNY exchange rate will strengthen to below 7.0 within the next 12 months. The logic behind this judgment is that China’s strong export performance will continue to support the Renminbi, while the Chinese government prefers to use other policy tools to boost the economy rather than pursue currency devaluation strategies.

Deutsche Bank, on the other hand, believes that the recent strengthening of the Renminbi against the US dollar signals the start of a long-term appreciation cycle. The bank estimates that the USD/CNY rate will rise to 7.0 by the end of 2025 and further appreciate to 6.7 by the end of 2026. This suggests that over the next year or so, the Renminbi may appreciate by more than 3% relative to the US dollar.

In short, the depreciation cycle that began in 2022 may have ended, and the Renminbi is expected to enter a new medium- to long-term appreciation trajectory.

Recent USD/CNY Trends: Short-term Volatility vs. Long-term Trend

As of mid-December 2025, the USD/CNY performance has shown a clear turning point.

The USD against the Renminbi has fluctuated bidirectionally within the 7.04 to 7.3 range, with an overall appreciation of about 3% for the year. More notably, on December 15, driven by the Federal Reserve’s rate cut and market sentiment, the USD/CNY exchange rate surged past 7.05, continuing its upward trend and reaching 7.0404, a new high in nearly 14 months.

In the offshore market, USD/USDCNH has fluctuated between 7.02 and 7.4, slightly higher than the onshore rate, reflecting that offshore Renminbi is more sensitive to international factors. On December 15, the offshore Renminbi (CNH) broke 7.05, rebounding more than 4% from the early-year high.

However, this upward momentum is not without setbacks. In the first half of the year, the Renminbi faced significant pressure, with the offshore rate once breaking through 7.40, and USD/CNY reaching its highest since 2022, even setting a new record since the 2015 “8.11” exchange rate reform. At that time, increased global tariff uncertainties, a strong US dollar index, and market expectations of further depreciation fueled the pressure on the Renminbi.

In the second half, as US-China trade negotiations progressed steadily and the US dollar index weakened, the Renminbi gradually stabilized and began to rebound, with market sentiment becoming more stable.

Four Major Factors Influencing USD/CNY Movement

The US Dollar Index is the most direct driver

The USD index directly determines the movement of USD/CNY. In the first half of 2025, the dollar index declined from about 109 at the start of the year to around 98, a nearly 10% drop, marking the weakest first half since the 1970s.

In the second half, the dollar index rebounded above 100 at times, but following the Fed’s rate cut in December and the potential dovish stance ahead, the dollar index fell over several days, bottoming at 97.869, and hovered around 97.8-98.5. This moderate strengthening of the dollar usually puts pressure on the Renminbi, but the positive effects of the US-China agreement temporarily offset short-term impacts.

US-China Trade Negotiations Directly Affect Market Expectations

Although the latest round of US-China economic and trade talks reached a ceasefire consensus in Kuala Lumpur—reducing tariffs on Chinese goods related to fentanyl from 20% to 10%, and suspending the 24% retaliatory tariffs until November 2026—whether this truce can be maintained long-term remains uncertain. After all, a similar agreement reached in Geneva in May this year quickly fell apart.

The future development of US-China trade relations remains the most important external factor in judging the USD/CNY exchange rate. If the current situation persists, the Renminbi exchange rate environment is expected to stabilize; but if tensions escalate, the Renminbi could weaken.

The Federal Reserve’s Monetary Policy Determines Dollar Strength

The Fed’s decisions are crucial for the dollar’s trend. In the second half of 2024, the Fed signaled rate cuts, but the magnitude and pace of cuts in 2025 will depend on inflation data, employment figures, and policies of the Trump administration.

If inflation remains persistently above target, the Fed may slow down rate cuts or keep interest rates high, supporting a stronger dollar; conversely, if economic slowdown becomes evident, accelerated rate cuts could weaken the dollar. Typically, the Renminbi and the US dollar index tend to move inversely.

People’s Bank of China Policies and Economic Performance

China’s monetary policy tends to remain accommodative to support economic recovery, especially amid a sluggish property market. The People’s Bank of China (PBOC) may lower interest rates or reserve requirements to inject liquidity, which generally exerts downward pressure on the Renminbi.

However, if accommodative monetary policy is combined with strong fiscal stimulus that stabilizes China’s economy, it could support the Renminbi in the long run. Additionally, increased use of the Renminbi in global trade settlement and currency swap agreements with other countries may help maintain currency stability over time.

Is Now a Good Time to Invest in Renminbi-Related Pairs?

Given the current situation, investing in USD/RMB currency pairs can be profitable, but timing is key.

Short-term outlook: The Renminbi is expected to remain relatively strong, with limited fluctuations and a tendency to move inversely to the dollar within a narrow range. The rapid appreciation into below 7.0 before the end of 2025 is less likely.

Key variables to watch include: USD index trends, signals from the Renminbi midpoint rate, and the strength and pace of China’s stabilizing growth policies. These three factors will determine the short-term volatility of the Renminbi.

How to Judge the Future Direction of the Renminbi Exchange Rate? Practical Investor Guide

Regardless of market changes, the Renminbi’s trend can be assessed from the following aspects:

First, the People’s Bank of China’s monetary policy stance

The PBOC’s policy stance directly influences money supply and thus the exchange rate. When monetary policy is accommodative (rate cuts or reserve requirement reductions), expectations of increased supply tend to weaken the Renminbi; when policies tighten (interest rate hikes or reserve ratio increases), liquidity tightens and the Renminbi tends to strengthen.

For example, starting November 2014, the PBOC adopted a loosening stance, cutting loan rates six times consecutively and continuously lowering reserve requirements, reducing the reserve ratio for small and medium-sized financial institutions from 18% to below 8%. During this period, USD/CNY rose from around 6 to nearly 7.4, illustrating the significant impact of monetary policy.

Second, China’s economic data performance

When China’s economy is stable or outperforming other emerging markets, it attracts sustained foreign investment inflows, increasing demand for the Renminbi and supporting its appreciation; if growth slows, demand diminishes, leading to depreciation.

Key indicators include GDP, PMI, CPI, and urban fixed asset investment. These data are released quarterly or monthly and are important references for investors.

Third, USD index fluctuations

The USD’s trend directly affects USD/CNY. The Federal Reserve and ECB’s monetary policies are often key drivers. For example, in 2017, the Eurozone’s economic recovery prompted the ECB to signal tightening, boosting the euro, while the USD index weakened after breaking 100, falling 15% for the year. During the same period, USD/CNY also declined, showing their high correlation.

Fourth, official exchange rate policy orientation

Unlike fully free-floating currencies, the Renminbi has experienced multiple exchange rate management reforms since 1978. On May 26, 2017, the PBOC adjusted the USD/CNY midpoint quotation model to “closing price + a basket of currencies + counter-cyclical factor,” strengthening official guidance. Recent observations suggest this approach influences short-term rates, but long-term trends depend on the overall direction of the currency market.

Five-Year Review of the Renminbi: From Appreciation to Depreciation and Back

Understanding history helps forecast the future. Reviewing the USD/CNY trend over the past five years:

2020: The USD/CNY fluctuated between 6.9 and 7.0 at the start of the year, with the Renminbi weakening to 7.18 in May due to the pandemic. As China quickly controlled the outbreak and economic recovery accelerated, coupled with the Fed’s near-zero interest rates, the Renminbi rebounded strongly to around 6.50 by year-end, appreciating about 6%.

2021: Strong exports and economic recovery kept USD/CNY in a narrow range of 6.35–6.58, averaging about 6.45, maintaining relative strength.

2022: A turning point. USD/CNY rose from 6.35 to over 7.25, depreciating about 8%, the largest decline in recent years. Aggressive Fed rate hikes, a soaring dollar index, China’s pandemic restrictions, and a property crisis exerted pressure on the Renminbi.

2023: USD/CNY fluctuated between 6.83 and 7.35, averaging around 7.0. China’s slower-than-expected recovery, ongoing property debt issues, and high US interest rates kept the Renminbi under pressure.

2024: The weakening dollar eased pressure on the Renminbi. China’s fiscal stimulus and property support measures boosted market confidence. USD/CNY experienced increased volatility, with offshore RMB breaking above 7.10 in August, reaching a six-month high.

Looking at this five-year cycle, the Renminbi’s trend is closely linked to China’s economic cycle, US dollar strength, and central bank policies.

Offshore RMB (CNH) vs. Onshore RMB (CNY): Why Do They Differ?

Offshore and onshore RMB exhibit notable differences. CNH trades in international markets like Hong Kong and Singapore with greater freedom and capital mobility, reflecting global sentiment; CNY is subject to capital controls, with the PBOC guiding rates through daily fixing and interventions. Therefore, CNH tends to be more volatile.

In 2025, despite multiple fluctuations, offshore RMB generally trended upward. Early in the year, US tariffs and a soaring dollar index to 109.85 caused CNH to weaken past 7.36; the central bank intervened with measures including issuing 60 billion yuan in offshore bonds and tightening the fixing. Recently, with easing US-China tensions, China’s stabilizing growth policies, and Fed rate cut expectations, CNH has strengthened significantly.

Summary and Future Outlook

As China continues its monetary easing cycle, the USD/RMB trend is becoming more pronounced. Historical similar cycles suggest such policy-driven phases can last up to a decade, with short- to medium-term performance influenced by dollar movements and other events.

Investors can greatly improve profitability by monitoring key factors—central bank policies, economic data, USD trends, and official guidance. The forex market is primarily macro-driven, with transparent data releases and large trading volumes allowing for two-way trading, making it a relatively fair and advantageous investment environment for individual investors.

Looking ahead to late 2025 and 2026, supported by resilient Chinese exports, reallocation of foreign investment into RMB assets, and a structurally weaker US dollar index, the appreciation of the Renminbi is more likely than depreciation. However, in the short term, close attention must be paid to variables such as the USD index, US-China negotiations, and China’s economic policies.