Will the RMB rise above 6.8?
The RMB exchange rate continued its strong momentum for two consecutive days at the start of the Year of the Horse, with both onshore and offshore rates reaching the highest levels since April 2023. Multiple institutions believe that the current round of appreciation is mainly driven by a weak US dollar, but RMB fundamentals also provide support. As long as the US dollar’s credit has not been restored, combined with the RMB’s own resilience, the appreciation trend is likely to continue.
On February 25, the onshore RMB broke the 6.87 mark against the US dollar, standing at 6.8658, while the offshore RMB was at 6.8628, with both rising more than 150 points intraday. Wang Qing, chief macro analyst at Dongfang Jincheng, attributes this appreciation to three factors: the stabilization of China-US economic and trade relations since November 2025 and improved external environment; sustained weakness of the US dollar supporting non-dollar currencies collectively; and concentrated forex settlement by export companies accelerating the pace of appreciation.
Goldman Sachs maintained a 12-month RMB target of 6.70 in its February 20 report, seeing about 22% undervaluation; HSBC adjusted its forecast to 6.85 for the end of Q1 in its February 16 report, with a year-end target of 6.75; Caitong Securities stated in its February 15 research that under extreme scenarios, the RMB exchange rate against the US dollar may approach 6.8.If the willingness to settle foreign exchange remains high, further appreciation may occur. All these point to credit-driven dynamics, with sustained deterioration of the dollar as the core driver.
Cautious views are also emerging. Wang Qing emphasized that the US dollar index may stabilize in 2026, and the actual impact of the Walsh policy needs close attention, as the momentum for benchmark RMB appreciation may weaken this year. Ming Ming, chief economist at CITIC Securities, also pointed out that as the recent effects dissipate, the momentum of corporate forex settlement may decline, and the immediate upward force may weaken in the short term.
Damage to Dollar Credit Is One of the Core Logics for the Current RMB Appreciation
Caitong Securities pointed out that the dollar index fell 9.4% throughout 2025, while RMB only appreciated 4.3% against the dollar. Measured by the RMB exchange rate index, the RMB actually fell 3.4% against a basket of currencies during the year, meaning the RMB was generally depreciating, only strengthening relative to the dollar. This data clearly shows that the key driver of this appreciation comes from the dollar side.
Caitong Securities believes that judging RMB/USD trends essentially means predicting the dollar’s future movements. The root cause of the dollar’s rapid decline in 2025 lies in market distrust of US sovereign credit and doubts about its long-term economic stability, undermining traditional logic where exchange rate fluctuations are analyzed through interest rate differentials.
From an asset performance perspective, during this Fed easing cycle, 10-year US Treasury yields have risen instead of falling. After easing began in September 2024, yields went from 3.73% to 4.04% by February 13, 2026, up by a total of 31BP. Caitong Securities notes this contrasts sharply with significant declines in long-term yields during the easing cycles of 2001, 2007, and 2019, reflecting declining investor confidence in dollar assets and the need for US Treasuries to offer higher credit premiums.
In October 2024, US Treasury data showed net debt interest expenditures reaching $881.1 billion, surpassing the defense budget for the first time and raising widespread concerns about fiscal sustainability. Using gold as the value measure, from early 2023 to the end of 2025, the dollar depreciated by 55.7% against gold, the RMB by 57.4%, and the euro, pound, and yen all depreciated by over 50%. Caitong Securities believes the collective depreciation of major currencies against gold is the result of the global fiat currency system’s credit foundation shaking.
Trump Faces an "Impossible Trinity," Dollar Weakness Hard to Reverse
Caitong believes US policies in 2026 will likely still fail to solve the "impossible trinity" of economic growth, inflation control, and fiscal sustainability. Sharp rate cuts may trigger runaway inflation, causing economic "stagflation" and damaging dollar credit; not cutting rates increases the risk of "hard landing" for the economy, which also impacts fiscal sustainability.
To win the 2026 midterm elections, Trump faces political pressure to lower prices and borrowing costs. Caitong Securities’ analysis shows he primarily has two tools: controlling energy prices, though effectiveness is doubtful due to OPEC+ and domestic oil interests; reducing imported inflation via tariff exemptions, but tariffs already account for 5% of US fiscal revenue, and massive cuts would directly impact revenue, forcing more Treasury issuance and further eroding dollar sovereign credit.
Caitong Securities notes if Trump does not sharply cut rates, high rates will suppress corporate investment and threaten highly debt-dependent AI capital spending. Meta, Alphabet, Amazon, and Oracle’s AI infrastructure investment is heavily reliant on debt financing. In Q2 and Q3 of 2025, AI-related investment contributed 0.9% and 0.8% to US GDP growth respectively, showing high dependency of the US economy on such spending.
Caitong Securities believes that regardless of Trump’s policy mix, any scenario leads to impacts on US sovereign credit; the dollar will likely remain weak, and the RMB may continue to appreciate against the dollar in 2026.
Seasonal Forex Settlement Boosts, Appreciation Pace Accelerates
Caitong Securities points out concentrated forex settlement also accelerated RMB appreciation. Every December, export enterprises see a seasonal increase in forex settlement margin, mainly due to financial accounting and profit realization needs, leading them to convert foreign currency income to RMB.
However, from September 2025, the settlement margin saw super-seasonal growth as export enterprises expected continued RMB appreciation and settled forex en masse. In December 2025, the margin grew super-seasonally to $100.1 billion. Short-term surge in forex settlement amplified RMB appreciation swings.
Strong Fundamental Support, RMB Expected to Continue Appreciating
Besides passive appreciation driven by dollar weakness and seasonal forex settlement, RMB’s own fundamental factors are also important supports.
Goldman Sachs pointed out China’s current account surplus in 2025 reached 3.7% of GDP, surpassing previous forecasts. Based on Q4 data, Goldman upgraded the 2026 surplus forecast to 4.3%, expecting the surplus share of global GDP to approach 1% in coming years. This suggests further RMB appreciation in 2026.
The report noted RMB-bullish fundamental factors remain solid: the RMB is deeply undervalued, coupled with stellar export sector performance; currency appreciation is usually the result of these two factors acting together.
HSBC sees this round of RMB strength rooted in three clear drivers: steadily advancing RMB internationalization, deepening economic rebalancing in China, and global capital’s structural shift toward diversified dollar asset allocation. Regulators may anchor future policy focus on industrial upgrading, technological self-reliance, and growth structure rebalancing—these topics jointly underpin RMB appreciation.
HSBC further explains China’s vision for RMB as a global reserve currency unfolds in four dimensions: increasing RMB use in international trade and cross-border payments; making RMB assets value stores for global investors; breaking market inertia of "soft dollar peg" and establishing exchange rate independence; providing a model for global “de-dollarization”. These four dimensions are elevating RMB from passive follower to a more active player in the international monetary system.
Possible Touchdown at 6.8, Central Bank May Intervene as Boundary Constraint
For quantifying appreciation space, Caitong Securities estimates that if the Fed cuts rates by 75 basis points in 2026, based on historical experience, the USD/RMB appreciation may be around 3.1%, with an extreme scenario possibly touching 6.83. If corporate willingness for forex settlement remains high, RMB may further appreciate to 6.8.
Goldman Sachs offers an even more aggressive forecast, maintaining a 12-month target of 6.70, believing RMB is currently undervalued about 22%. China’s current account surplus reached 3.7% of GDP in 2025 and is projected at 4.3% in 2026. Fundamentals support further RMB appreciation. Goldman points out the RMB is appreciating steadily at less than 1% per month and has become an important underlying force affecting broader dollar movement.
HSBC lowered its end-Q1 forecast to 6.85 and year-end target to 6.75, noting the dollar has already fallen below the implied rate differential level, which has become the norm for the dollar index in the past year.
However, appreciation does have boundaries. Caitong Securities points out that since December 2025, the spot rate has been consistently below the central parity, reflecting central bank intervention against rapid one-sided appreciation. While tolerance for exchange rate flexibility has increased, the central bank will not allow the RMB to appreciate too quickly in one direction. Based on the 3.1% appreciation estimate, total export trade may decrease by about 0.8%, and export growth in 2026 may fall to 3.0%; overall pressure is controllable.
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