RMB Mid-Rate Hits 3.5-Year High; Market Outlook Points to Range-Bound Strength

The RMB exchange rate extended its appreciation trend. On August 19, the central parity rate of RMB against the US dollar was set at 6.7854, the highest level in three and a half years, representing an appreciation of about 3.55 percent from the 7.03 level at the end of 2025; the spot RMB/USD rate rose from 6.989 to 6.74, an appreciation of more than 3.4 percent.

Multiple analysts believe the latest RMB strength is not driven by a single factor but is the joint result of a US dollar pullback, continued robust export growth, the release of corporate FX-settlement demand, and improving exchange-rate expectations. Looking forward, the market holds a relatively positive view on a moderate RMB appreciation, with a bias toward strong performance and two-way fluctuation likely to be the prevailing tone.

US Dollar Pullback Resonates With Trade Surplus

"The periodic weakness of the dollar is the primary catalyst for this round of RMB appreciation," said Lian Ping, chairman of the China Chief Economists Forum. He noted that after the US-Japan joint intervention in the yen exchange rate, the yen rebounded sharply in the short term, dragging on the US Dollar Index. At the same time, periodic easing of geopolitical risk in the Middle East reduced risk aversion and further pushed the dollar lower.

Recent US economic data have also reinforced market expectations of a weaker dollar. The US Bureau of Labor Statistics showed that nonfarm payrolls in July declined by 23,000, turning negative. July retail and food-service sales fell 0.6 percent month-on-month, and the University of Michigan's preliminary August consumer sentiment index dropped to 51.0 from 55.2 in July. Synchronized weakness in employment, consumption, and confidence has cooled market expectations of a further Federal Reserve rate hike, with the US Dollar Index briefly probing a two-month low and currently trading around 99.7.

However, the short-term dollar pullback does not mean the dollar has entered a one-way downtrend. US inflation, fiscal deficits, Treasury yields, and geopolitical risks remain highly uncertain. Once risk aversion resurges or Federal Reserve policy expectations shift, the dollar may still rebound periodically.

If dollar weakness is the external catalyst, China's foreign-trade performance is the more solid fundamental support for this round of RMB appreciation. Wang Qing, chief macro analyst at Golden Credit Rating, said that China's external trade environment has remained broadly stable this year, with exports continuing to grow rapidly, the key reason why the RMB exchange rate has charted a relatively independent trend amid a complex international environment.

Customs data show that in the first seven months of 2026, China's total goods trade reached 30.13 trillion yuan, up 17.3 percent year-on-year, with exports of 17.44 trillion yuan (up 14 percent) and imports of 12.69 trillion yuan (up 22 percent). Mechanical and electrical products, new-energy goods, and high-end manufacturing continued to underpin export performance.

Rapid export growth translates into sustained USD income for corporates. Entering August, some firms concentrated their FX settlement, increasing RMB demand in the market. The People's Bank of China has also guided the daily central parity rate upward while keeping the USD/CNY trading band stable, anchoring market expectations and curbing excessive FX volatility.

Outlook: Bias Toward Strength With Two-Way Fluctuation

Wang Qing said the dollar index breaking below 100 has triggered broad-based appreciation in non-dollar currencies, including the RMB. Combined with July's continued strong export growth and stable external trade conditions, the core drivers supporting RMB strength remain intact.

However, the recent slight adjustment of the central parity has drawn market attention. On August 18, the central parity rate was set at 6.7905, 32 basis points lower than the prior session. As of 5 p.m. that day, the offshore and onshore RMB/USD spot rates peaked at 6.7419 and 6.7421, failing to extend the prior session's strength.

Analysts said the August 17 4:30 p.m. onshore RMB/USD fixing at 6.7382, with the night-session close at 6.7417, pulled back intraday appreciation and fed into the next day's central parity setting.

Lian Ping expects the RMB to remain strong in the short term. The US-Japan coordinated yen intervention has pushed up the yen, Federal Reserve rate-hike expectations are cooling, and a domestic policy package keeps China's growth stable, all suggesting the RMB's external pressure is manageable. Exports and FX-settlement demand will continue to provide support, and the central parity adjustment signals that the central bank is willing to use the midpoint as a counter-cyclical tool to curb excessive volatility.

Looking ahead, market participants believe that if the Federal Reserve keeps policy rates unchanged this year, the dollar index will have support but is unlikely to keep rising, leaving the RMB's external pressure manageable. From the domestic perspective, stable economic fundamentals, particularly continued strong exports, will provide solid support for the RMB. The People's Bank of China has calibrated its exchange-rate policy with appropriate flexibility, enhancing RMB resilience. On balance, the RMB is expected to appreciate moderately within the year, but a repeat of the rapid first-half appreciation is unlikely; the market is more likely to operate in a two-way fluctuation pattern, with the full-year trajectory presenting a rise-then-stabilize pattern.