RMB exchange rate strengthens at the start of the year, experts warn against blindly "betting" on the direction

◎ Reporter Fan Zimeng

On the first trading day after the 2026 Spring Festival holiday (February 24), the RMB exchange rate continued its strong performance: as of 4:30 p.m., onshore and offshore RMB were at 6.8817 and 6.8776 respectively, with cumulative appreciation since 2026 of 1.53% and 1.41%.

This round of RMB strength is the result of multiple factors resonating. Industry experts believe that: on one hand, the marginal improvement in the external environment has provided upward space for non-U.S. currencies, including the RMB; on the other hand, the concentrated release of corporate foreign exchange settlement demand before and after the Spring Festival has injected seasonal momentum into the exchange rate.

Ming Ming, Chief Economist at CITIC Securities, told Shanghai Securities News that, around the Spring Festival, the US dollar index fluctuated overall. Coupled with the release of foreign exchange settlement demand from foreign clients and market expectations, this drove the RMB exchange rate to remain relatively strong, successfully breaking through the 6.90 level.

Wang Qing, Chief Macro Analyst at Orient Securities, told Shanghai Securities News that the offshore RMB leading the rally indicates that market sentiment has been high during this period, further boosting the RMB’s appreciation.

Despite the impressive performance of the RMB, several experts remind that the RMB exchange rate is driven by multiple factors and should not be viewed as a one-sided appreciation or depreciation. Future RMB trends still depend on changes in settlement demand, fundamental expectations, and the dollar’s direction. Market participants should remain rational and avoid blindly betting on a one-sided trend.

Externally, the new Federal Reserve Chair nominee Waller advocates a “rate cut + balance sheet reduction” policy combination, which introduces new uncertainties for the dollar’s movement. Wang Qing believes that the US dollar index is expected to stabilize in 2026, and the actual impact of Waller’s policy proposals warrants close attention. This could mean that the passive appreciation of the RMB against the dollar this year may significantly weaken. Galaxy Securities also stated that if tightening expectations intensify, the dollar may strengthen temporarily, and the passive appreciation space for the RMB could face short-term contraction.

Internally, as seasonal effects gradually fade, the momentum for corporate foreign exchange settlement may also decline. Ming Ming said that after seasonal release, the short-term driving force of foreign client settlement demand may weaken. Li Bin, Deputy Director and spokesperson of the State Administration of Foreign Exchange, recently stated that due to seasonal factors, corporate receipts and settlement increased rapidly at the end and beginning of the year. As demand gradually releases, recent growth in corporate receipts and settlement has slowed.

Wang Qing further reminded that if the RMB exchange rate experiences sharp fluctuations detached from fundamentals, regulatory authorities will decisively use tools to stabilize the market and send clear policy signals. “Historical experience shows that these policy tools can effectively guide market expectations and prevent excessive exchange rate fluctuations,” Wang Qing said.

The People’s Bank of China recently released the Q4 2025 Monetary Policy Implementation Report, reaffirming the adherence to a market-based, basket-of-currencies reference, and a managed floating exchange rate system. It emphasizes maintaining exchange rate flexibility, leveraging the exchange rate’s role as an automatic stabilizer for macroeconomic and balance of payments adjustments, strengthening expectation guidance, preventing excessive fluctuations, and keeping the RMB exchange rate basically stable at a reasonable and balanced level.

(Edited by: Wen Jing)

Keywords: RMB Exchange Rate