The RMB surged, returning to the "6 era"

In the recent foreign exchange market, the exchange rate of RMB against the US dollar has shown strong performance and continues to appreciate. On December 16, the onshore and offshore RMB exchange rates against the US dollar both strengthened, breaking through the 7.05 mark. Among them, the offshore RMB exchange rate rose to a maximum of 7.0358 during the session, and the onshore RMB exchange rate reached a maximum of 7.0417 during the session. Both hit new highs since October 8, 2024. Market attention gradually focused on whether the RMB can further approach or even break through the important psychological mark of "7.0".

This round of appreciation of the RMB is driven by many factors. The direct cause is the weakening of the external U.S. dollar: after the Federal Reserve announced an interest rate cut on December 11, the U.S. dollar index continued to decline and fell below the 100 integer mark, which provided a general appreciation window for non-U.S. currencies, including the RMB. At the same time, internal seasonal factors also provided strong support. The end of the year is usually the peak period for corporate foreign exchange settlement. The increased foreign exchange settlement operations of the entity sector to meet the needs of financial statements, working capital, etc. have formed concentrated market demand and significantly promoted the RMB exchange rate. Analysts pointed out that some of the demand for foreign exchange settlement accumulated in the early stage may be released at an accelerated pace as the exchange rate strengthens, further strengthening the appreciation momentum.

Guidance at the policy level also laid the foundation for the stable operation of the exchange rate. The market has observed that despite the rapid rise in the RMB market exchange rate, the daily adjustment of the RMB central parity rate set by the central bank is relatively mild. This shows that the current policy direction aims to maintain the basic stability of the exchange rate at a reasonable and balanced level, allowing market forces to drive moderate appreciation of the RMB, while avoiding the formation of unilateral expectations of appreciation or depreciation. Judging from the overall performance throughout the year, the RMB exchange rate has embarked on a trajectory of gradual appreciation. As of December 15, the cumulative appreciation rate of the offshore RMB during the year was approximately 4%.

As the RMB exchange rate continues to approach the "7.0" mark, the market is actively discussing its subsequent trend. From a comprehensive institutional perspective, under the combined effects of the demand for foreign exchange settlement at the end of the year, a weak US dollar, and a prudent exchange rate policy, there is a high probability that the RMB will maintain a strong operating pattern in the short term. There is a view that under the influence of seasonal factors, the possibility of the exchange rate breaking through "7.0" in stages exists. Follow-up trends need to focus on several aspects: first, whether the overall trend of the US dollar index will continue to be weak; second, the policy signal conveyed by the central parity of the RMB; third, the specific implementation effect of domestic economic stabilization policies and its boosting effect on economic fundamentals. These factors will jointly determine the direction and magnitude of short-term fluctuations in the RMB exchange rate.

For 2026, many financial institutions have released forward-looking analyses. It is generally expected that the RMB exchange rate will maintain overall stability and may achieve moderate appreciation on the basis of balancing multiple internal and external goals.

In terms of domestic research institutions, CICC predicts that the RMB exchange rate will remain relatively stable in 2026. Lu Zhe, an analyst at Soochow Securities, suggested that 2025 may mark the end of the RMB depreciation cycle in the past three years, and a new round of appreciation cycle may begin. He predicts that with the U.S. dollar showing structural weakness, China's current account maintaining a surplus, and the expected net inflow of securities investment funds, the RMB exchange rate against the U.S. dollar is expected to rise above 7.0 in 2026, and may touch the 6.70-6.80 range by the end of the year. In the longer term, it may even gradually rise to the 6.40-6.50 level. Ming Ming, chief economist of CITIC Securities, also believes that the weak US dollar may continue in 2026. In conjunction with the relaxed and moderate exchange rate stabilization policy, the resilience of the RMB exchange rate will increase. If the endogenous momentum of the domestic economy is effectively restored, the RMB exchange rate center is expected to achieve a breakthrough.

Foreign investment institutions are also optimistic about the long-term potential of the renminbi. Deutsche Bank predicts that the RMB exchange rate against the US dollar may rise to 6.7 by the end of 2026 and is expected to reach 6.5 in 2027. UBS predicts that the RMB exchange rate is expected to exceed 6.9 in the second half of 2026. Ding Shuang, an economist at Standard Chartered Bank, pointed out from a more macro perspective that the deepening process of RMB internationalization, the continued current account surplus and the improvement of China's productivity will provide solid support for the long-term steady strengthening of the RMB exchange rate. The policy level is committed to enhancing the international status of the RMB through improving financial infrastructure and innovating the cross-border payment system, which is pushing the RMB into a stable long-term appreciation channel.