RMB Shows Resilience with Steady Rise in Uncertain Times

The Chinese yuan has emerged as a pillar of stability in global currency markets, demonstrating resilience through two-way fluctuations with a steady upward trend. On August 4, the onshore RMB (CNY) closed at 6.7533 yuan per US dollar, up 10 basis points from the previous close, while the offshore RMB (CNH) rose 40 basis points to 6.7542, according to Xinhua News. The modest gains extend a broader appreciation trend that has seen the currency reach its strongest levels since March 2023.

A Steady Climb Through July

July proved to be a pivotal month for the RMB. The onshore currency appreciated 0.55% against the dollar, peaking mid-month at 6.7456 — the highest level since March 2023. The offshore RMB followed a similar trajectory, rising 0.57% for the month and touching 6.7422 at its peak, as reported by financial data provider 10jqka. The central parity rate, set daily by the People’s Bank of China, hit a year-to-date high of 6.7892 on July 30.

The appreciation reflects a convergence of external and internal factors. From an external perspective, the US dollar index weakened notably in July, with most non-US currencies appreciating against the greenback. Li Liuyang, chief FX analyst at CICC Research, attributes the dollar’s decline primarily to market concerns about policy uncertainty under Federal Reserve Chair Warsh. “From the full month of July, the US dollar index first stabilized and then fell, with the decline mainly concentrated after the FOMC meeting,” Li said. “Market concerns about Warsh’s policy uncertainty led to a notable weakening of the dollar index.”

On the domestic front, moderate release of foreign exchange settlement demand and relatively balanced FX supply-demand dynamics have supported the RMB’s stable-to-strong performance. June net FX settlement reached a relatively high level for the year, and the central parity rate hit a year-high in July, providing internal momentum for the currency’s steady rise.

Policy Backing for Market Stability

Chinese authorities have signaled a clear commitment to maintaining exchange rate stability while allowing market forces to play a decisive role. At its H2 2026 work meeting held on August 1, the People’s Bank of China stated it will continue implementing a moderately loose monetary policy while maintaining the market’s decisive role in exchange rate formation, with the RMB exchange rate fluctuating in both directions, as reported by Wall Street CN.

Similarly, the State Administration of Foreign Exchange (SAFE) held its H2 2026 foreign exchange management work exchange meeting on the same day, declaring that China’s foreign exchange market has shown strong vitality and resilience in 2026. SAFE emphasized plans to build a “breakwater and wave barrier” against external shocks, strengthen cross-border capital flow monitoring, and improve macro-prudential management and expectation management to maintain foreign exchange market stability, according to Jin10.

The policy stance reflects a deliberate approach: allow two-way fluctuations while preventing excessive volatility or one-sided expectations. This balanced strategy has helped the RMB navigate a complex global environment marked by geopolitical tensions and monetary policy divergence.

Strong Fundamentals Underpin the Currency

China’s foreign exchange position remains robust. In the first half of 2026, non-bank sector cross-border capital net inflows reached $247.2 billion, while bank settlement and sales of foreign exchange posted a surplus of $271.2 billion, according to data released by SAFE at a press conference on July 17. Foreign exchange market transaction volume reached $22.1 trillion, up 5% year-on-year.

Foreign investment in China has also shown notable recovery. In the first five months of 2026, foreign investment increased by approximately $160 billion net — significantly better than the same period last year. Foreign equity investment increased by over $50 billion, and reinvestment of earnings by foreign enterprises grew 35% year-on-year. This renewed foreign appetite for Chinese assets reflects growing confidence in the world’s second-largest economy.

China’s trade surplus has remained at a large scale, providing a solid foundation for currency strength. The RMB internationalization process has also been advancing steadily, with panda bond issuance exceeding 160 billion yuan in H1 2026, and China’s external assets reaching approximately $12 trillion at end-March 2026 — a record high.

Expert Outlook: Two-Way Fluctuation with Moderate Appreciation

Looking ahead, most analysts expect the RMB to maintain its resilience through two-way fluctuations with a steady-to-strong bias. Li Liuyang notes that geopolitical risks in Iran and other factors may continue to bring uncertainty to global energy and foreign exchange markets. “In August, the dollar index still has some room to decline; with expectations of stable Chinese exports and a moderately stronger central parity rate, the RMB exchange rate is expected to remain relatively stable, with the overall trend likely to show moderate appreciation,” he said.

Wang Qing, chief macro analyst at Golden Credit Rating, offers a more measured view. He expects the RMB to largely return to a pattern of reverse fluctuation with the dollar in H2, with relatively small amplitude. “The possibility of repeating the rapid appreciation of H1 is small,” Wang said. “It will be more in a two-way fluctuation state, with an expected core fluctuation range of 6.7 to 7.0 yuan.”

Investment banks have published a range of year-end forecasts for the RMB, as compiled by Sina Finance. Deutsche Bank is the most optimistic at 6.7, followed by Bank of America at 6.8. UBS and Standard Chartered see a 6.9-7.05 range, while Morgan Stanley takes a more conservative stance at 7.05. Chinese institutions cluster in the 6.80-7.10 range.

Risks on the Horizon

Despite the generally positive outlook, several risks could test the RMB’s resilience. Federal Reserve policy uncertainty remains a key variable — if the Fed signals rate hikes, the dollar could strengthen, putting pressure on emerging market currencies. Geopolitical tensions in the Middle East, particularly the Iran conflict, could disrupt global energy and foreign exchange markets. Domestic economic recovery momentum and asset price performance could also affect capital flows, while US-China trade tensions and tariff measures may impact export performance.

Huaxi Securities research suggests that China’s trade surplus is expected to remain at a large scale, with continued release of corporate and household FX settlement willingness. “With the advancement of RMB internationalization and growth of international demand, the RMB will remain in a medium-term appreciation channel,” the research note states.

What to Watch Next

Market participants will be closely monitoring several developments in the coming months. The pace of RMB appreciation in Q3 may slow somewhat due to dividend-related FX purchases and periodic dollar index strength, according to Nanhua Futures research. However, in Q4, seasonal FX settlement and a weak dollar index could see the RMB resume its appreciation trend against the dollar.

The trajectory of the US dollar index, Federal Reserve policy signals, and China’s export performance will be critical determinants of the RMB’s path in H2 2026. With policy support firmly in place and fundamentals remaining strong, the RMB appears well-positioned to continue its pattern of two-way fluctuations with a steady upward bias — a testament to the currency’s growing resilience in an increasingly uncertain global economic landscape.