The RMB exchange rate has continued its strong performance for two consecutive days at the beginning of the Year of the Horse, with both onshore and offshore rates reaching their highest levels since April 2023. Multiple institutions have determined that this round of appreciation is primarily driven by the weakness of the US dollar, but the fundamentals of the RMB also provide support. As long as the credit of the US dollar has not been restored, combined with its own resilience, the appreciation trend is expected to continue.
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On February 25, the onshore RMB broke through the 6.87 mark against the US dollar, reporting 6.8658, while the offshore RMB reported 6.8628, with daily gains exceeding 150 points. Wang Qing, Chief Macro Analyst at Dongfang Jincheng, attributed this round of appreciation to three driving forces: the stabilization of Sino-US economic and trade relations since November 2025, improvements in the external environment; the continued weakness of the US dollar leading to a collective strengthening of non-US currencies; and the concentrated release of foreign exchange settlement demand from export enterprises amplifying the pace of appreciation.
Goldman Sachs maintained a 12-month target of 6.70 for the RMB in its report on February 20, believing that the RMB still has about 22% undervaluation potential; HSBC adjusted its first-quarter end forecast to 6.85 and lowered its year-end target to 6.75 in its report on February 16; and Caitong Securities stated in its research report on February 15 that under extreme assumptions, the RMB/USD exchange rate could approach 6.8. If the willingness to settle foreign exchange continues to rise, further appreciation may even be possible. The above collectively points to credit-driven factors, with the continued deterioration of the US dollar as the core driving force.
Cautious views are also emerging. Wang Qing warned that the US dollar index is expected to stabilize in 2026, and the actual impact of the Walsh policy deserves close attention, as the momentum for RMB appreciation may weaken this year. Mingming, Chief Economist at CITIC Securities, also pointed out that as recent effects fade, the momentum for enterprises to settle foreign exchange may decline, and the significant upward force may weaken in the short term.
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<h2>The damage to US dollar credit is one of the core logics behind this round of RMB appreciation</h2>
Caitong Securities pointed out that the US dollar index fell by 9.4% throughout 2025, while the RMB appreciated only 4.3% against the US dollar. If measured by the RMB exchange rate index, the RMB actually fell by 3.4% against a basket of currencies throughout the year, indicating that the RMB is overall depreciating, only strengthening relative to the US dollar. This data clearly shows that the core driver of this round of appreciation comes from the US dollar side.
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Caitong Securities believes that judging the exchange rate of the RMB against the USD essentially involves making a judgment about the future trend of the USD. The root cause of the USD's rapid weakening by 2025 lies in the market's distrust of U.S. sovereign credit and doubts about its long-term economic stability, which breaks the traditional logical premise of analyzing exchange rate fluctuations based on interest rate differentials.
From the perspective of asset performance, during this round of the Federal Reserve's interest rate cut cycle, the yield on 10-year U.S. Treasury bonds has risen instead of falling. Since the interest rate cut began in September 2024, it has increased from 3.73% to 4.04% on February 13, 2026, a cumulative increase of 31 basis points. Caitong Securities points out that this is in stark contrast to the significant decline in long-term rates during the three previous interest rate cut cycles in 2001, 2007, and 2019, reflecting the market's gradual loss of confidence in USD assets, necessitating U.S. Treasuries to offer higher credit premiums to investors.
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In October 2024, data from the U.S. Treasury Department showed that net interest payments on debt reached $881.1 billion, surpassing the defense budget for the first time, raising widespread concerns about fiscal sustainability. Measured against gold as a value standard, from the beginning of 2023 to the end of 2025, the USD depreciated by 55.7% relative to gold, the RMB depreciated by 57.4%, and the euro, pound, and yen all depreciated by over 50%. Caitong Securities believes that the collective depreciation of major currencies against gold is a result of the erosion of the credit foundation of the global fiat currency system.
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<h2>Trump Faces the &#34;Impossible Triangle,&#34; Weakness of the USD Difficult to Reverse</h2>
Caitong believes that in 2026, U.S. policies may still struggle to resolve the &#34;impossible triangle&#34; of economic growth, inflation stabilization, and fiscal sustainability. Significant interest rate cuts could trigger uncontrollable inflation, leading to &#34;stagflation&#34; and damaging the credit of the USD; not cutting rates would directly increase the risk of a &#34;hard landing&#34; for the economy, similarly impacting fiscal sustainability.
To win the midterm elections in 2026, Trump faces political pressure to lower prices and reduce borrowing costs. Caitong Securities analyzes that the tools available to him are mainly two: first, controlling energy prices, but the effectiveness is questionable due to the interests of OPEC+ and U.S. domestic oil companies; second, reducing imported inflation through tariff exemptions, but tariffs already account for 5.0% of U.S. fiscal revenue, and large-scale reductions would directly impact fiscal revenue, forcing the Treasury to issue more government bonds, further eroding the sovereign credit of the USD.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/904c6808-b131-4b85-a18b-449c1dfed769.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/904c6808-b131-4b85-a18b-449c1dfed769.png"/> Caitong Securities points out that if Trump does not significantly cut interest rates, high rates will suppress corporate investment while threatening AI capital expenditures that are highly reliant on debt. The AI infrastructure investments of Meta, Alphabet, Amazon, and Oracle have become highly dependent on debt financing
In the second and third quarters of 2025, AI-related investments contributed 0.9% and 0.8% to the growth rate of the US GDP, respectively, indicating a significant increase in the US economy's reliance on this expenditure.
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Caitong Securities believes that regardless of the policy combination adopted by Trump, the final outcome points to an impact on US sovereign credit, and the US dollar is likely to remain weak, with the renminbi expected to continue appreciating against the dollar in 2026.
<h2>Seasonal Foreign Exchange Settlement Boosts Appreciation Pace</h2>
Caitong Securities points out that the concentrated release of foreign exchange settlement demand has also accelerated the pace of renminbi appreciation. Every December, the foreign exchange settlement and sales surplus of export enterprises typically sees a seasonal increase, mainly due to financial accounting and profit realization needs, concentrating foreign exchange income into renminbi.
However, starting from September 2025, the foreign exchange settlement and sales surplus showed a super-seasonal growth, stemming from export enterprises' expectations that the renminbi will continue to appreciate in the future, leading to concentrated settlements. The foreign exchange settlement and sales surplus in December 2025 even surged to USD 100.1 billion. The short-term surge in settlements has accelerated the volatility of renminbi appreciation.
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<h2>Strong Fundamental Support, Renminbi Expected to Continue Appreciating</h2>
In addition to the passive appreciation driven by a weaker dollar and the seasonal wave of foreign exchange settlements, the fundamental factors of the renminbi itself also provide important support.
Goldman Sachs points out that in 2025, China's current account surplus will account for 3.7% of GDP, exceeding previous forecasts. Based on fourth-quarter data, Goldman Sachs has raised its 2026 surplus ratio forecast to 4.3% and expects that in the coming years, this surplus will approach 1% of global GDP, which means the renminbi will further appreciate in 2026.
The report indicates that the fundamental factors supporting a bullish outlook on the renminbi remain solid: the renminbi exchange rate is deeply undervalued, coupled with strong performance in the export sector, and currency appreciation is usually a balanced result of these two major factors.
According to HSBC, the current strength of the renminbi is rooted in three clear main lines: the steady advancement of renminbi internationalization, the deepening of China's economic rebalancing, and the structural shift in global capital diversification away from dollar assets. Regulatory authorities are expected to focus future policies on industrial upgrading, technological self-reliance, and rebalancing growth structures, which together form the underlying support for renminbi appreciation.
HSBC further elaborates that China's vision of promoting the renminbi as a global reserve currency is unfolding along four dimensions: increasing the proportion of renminbi use in international trade and cross-border payments;
Promoting RMB assets to become a value storage tool for global investors; breaking the market's inertia perception of the RMB being &#34;soft-pegged to the US dollar,&#34; and establishing exchange rate independence; providing a demonstration for the global exploration of &#34;de-dollarization.&#34; These four dimensions are shaping the RMB from a passive follower into a more proactive participant in the international monetary system.
<h2>Expected to reach 6.8, central bank intervention may constitute boundary constraints</h2>
In terms of quantifying appreciation space, Caitong Securities estimates that assuming the Federal Reserve cuts interest rates by 75 basis points in 2026, based on historical experience, the appreciation of the US dollar against the RMB may be around 3.1%, with a maximum scenario potentially reaching 6.83. If corporate foreign exchange settlement willingness continues to rise, it may even appreciate further to the 6.8 level.
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Goldman Sachs provides a more aggressive forecast, maintaining a 12-month target of 6.70, believing that the RMB is currently undervalued by about 22%. China's current account surplus is expected to reach 3.7% of GDP in 2025, rising to 4.3% in 2026, fundamental factors support further appreciation of the RMB. Goldman Sachs points out that the RMB has been steadily appreciating at a rate of less than 1% per month, becoming an important underlying force affecting the broader US dollar trend.
HSBC has lowered its first-quarter end forecast to 6.85 and its year-end target to 6.75, noting that the US dollar against the RMB has fallen below the implied level of interest rate differentials, a divergence that has become the norm for the US dollar index over the past year.
However, appreciation is not without constraints. Caitong Securities points out that after December 2025, the spot exchange rate has consistently been below the midpoint, reflecting that the central bank is intervening in the unilateral rapid appreciation trend. Although the central bank's tolerance for exchange rate flexibility has increased, it will not allow the RMB to appreciate too quickly unilaterally. Based on a 3.1% appreciation estimate, total export trade volume is expected to decrease by about 0.8%, and export growth may slow to 3.0% in 2026, with overall pressure being controllable.
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Multiple institutions have pointed out that the damage to the dollar's credit is the core driver of this round of appreciation. As long as the weak pattern of the dollar has not reversed, combined with the amplified effect of corporate foreign exchange settlement demand and fundamental support, the trend of RMB appreciation is difficult to end. According to Caifeng Securities' calculations, in extreme cases, it may break 6.8

- The Chinese yuan has strengthened against the US dollar, reaching its highest level since April 2023, driven by a weak dollar and robust fundamentals.  
- Analysts attribute the rise to improved US-China trade relations, collective strengthening of non-USD currencies, and increased demand for currency exchange from exporters.  
- Despite this strength, caution remains regarding the sustainability of this trend due to potential stabilization of the dollar index and fluctuating exchange demands.

Will the RMB break 6.8?