RMB Breaks 7.0: Seasonal Flows and Dollar Weakness Drive Surge

The offshore Renminbi (CNH) has surged past the critical 7.0 per Dollar barrier for the first time in 14 months, trading at 6.9977 as of Dec 25. The move marks a significant shift in sentiment, driven by year-end corporate settlement flows and a broadly softer US Dollar.

The “Settlement Tide”

Market analysis from Shenwan Hongyuan Securities indicates that the appreciation is heavily influenced by the traditional “year-end settlement wave.” Exporters, sitting on accumulated foreign earnings, are converting funds back to RMB for operational needs.

• Correlation: Since December, the correlation between the RMB and the USD index has risen to 0.95, suggesting the move is fundamentally aligned with the Dollar's recent slide below the 99 handle.
• Policy Stance: The People's Bank of China (PBOC) has signaled tolerance for this strength, setting reference rates that track market moves, though analysts warn that rapid appreciation might invite “smoothing” operations to prevent export competitiveness from eroding too quickly.

2026 Outlook

Looking ahead, the divergence between onshore (CNY) and offshore (CNH) rates suggests international capital is betting on further appreciation. However, with the looming threat of tariff uncertainties returning under a potential shift in US trade policy, volatility is expected to remain high. The consensus target for the RMB in 2026 has shifted to a “mild appreciation” bias, potentially stabilizing in the 6.80-7.00 range.