The US dollar falls below 7 against the Chinese yuan! Can this appreciation continue until 2026?

The Renminbi recently made a big move—both the USD to RMB exchange rate and the offshore USD to RMB rate hit new lows. On December 25th, the offshore USD to RMB fell to 6.9965, the lowest since September 2024; the onshore USD to RMB even dropped to 7.0051, a historic low since May 2023. In simple terms, the RMB has firmly broken above the 7 threshold.

Why Did the RMB Suddenly Appreciate? Three Forces in Resonance

This round of appreciation is no coincidence; three forces are simultaneously at play.

First, the USD itself has weakened. The Federal Reserve’s rate cuts and the rise of de-dollarization trends have directly caused the USD index to fall over 10% this year, with a 2% decline in the past month. When the dollar loses strength, the RMB naturally appears more robust.

Second, the central bank is intentionally guiding the appreciation. The People’s Bank of China has been raising the midpoint (reference rate) of USD to RMB exchange rate repeatedly this year, sending a clear signal: our central bank intends to let the RMB rise. This guidance is strong, and the market understands the central bank’s policy well.

Finally, the year-end foreign exchange settlement peak has an additive effect. By 2025, China’s trade surplus has accumulated significantly. As the year-end approaches, companies are competing to settle foreign exchange and convert to RMB. This seasonal surge in foreign exchange demand directly boosts RMB demand.

Wang Qing, Chief Macro Analyst at Orient Securities, also observed this: “The weakening dollar and seasonal foreign exchange conversions by exporters are the main drivers pushing the RMB stronger.” He also pointed out that the continued appreciation of the RMB has an additional benefit—it can attract more foreign capital into China’s capital markets.

Will the RMB Continue to Rise in 2026? Three Institutions’ Perspectives

Interestingly, although the RMB has already appreciated a bit, many analysts believe it is actually undervalued—based on trade-weighted indices and China’s economic fundamentals.

ANZ Bank senior strategist Xing Zhaopeng believes that in the first half of 2026, the USD to RMB may fluctuate between 6.95 and 7.00, without significant further appreciation, entering a range-bound consolidation.

Goldman Sachs is more optimistic. They think the RMB is undervalued by about 25% relative to economic fundamentals. According to their forecast, the USD to RMB will fall to around 6.90 by mid-2026, and could drop further to 6.85 by the end of the year. If their prediction proves correct, the RMB could appreciate by over 3%.

Bank of America holds the most aggressive view. They believe that easing US-China tensions will improve Chinese exporters’ outlook, leading to further USD selling by exporters in 2026, which will directly push down the USD to RMB rate. They project that by the end of 2026, the USD to RMB could fall to 6.80.

Underlying Logic: Who Benefits from RMB Appreciation?

From a monetary policy perspective, China’s central bank has not yet further cut interest rates, which in itself helps protect the RMB exchange rate. Plus, with liquidity tightening in the offshore market around year-end (holiday factors), the RMB faces pressure but actually benefits from upward movement.

Deeper down, the appreciation of the RMB is an external reflection of China’s economic and trade advantages. Large export volumes, substantial trade surpluses, and the central bank’s resolve all support the RMB’s rise. Moreover, appreciation can optimize capital inflow structures and attract more long-term funds.

Overall, the recent appreciation of USD to RMB is well-founded and not just short-term speculation. Whether it can continue into 2026 depends on three variables: USD trends, central bank stance, and trade patterns. Based on current forecasts from major institutions, the RMB’s upward momentum may persist into the first half of 2026, but the pace might slow down. In any case, this remains a key indicator worth ongoing observation.