Right after the May Day holiday, those in foreign trade began to feel uneasy. On May 7, the offshore renminbi (RMB) exchange rate against the US dollar broke through 6.8, marking a key turning point in this round of appreciation.

         On May 11, the RMB strengthened strongly against the US dollar, with both onshore and offshore rates rising. Both broke through the 6.8 level, signaling the RMB’s return to an appreciation channel.

         After the RMB rapidly broke 7 against the US dollar at the end of last year, it has been the strongest performer among major non‑US currencies since the beginning of this year, appreciating by nearly 3%. In contrast, currencies such as the Japanese yen, euro, and British pound have either depreciated slightly or appreciated modestly against the dollar, all with significantly smaller gains than the RMB.

         At present, the RMB exchange rate against the US dollar has reached its strongest level in three years.

         In fact, as early as early April, when the RMB moved from 6.9 to 6.8, some in foreign trade asked: Why, amid the outbreak of the US‑Israel‑Iran war, has the RMB continued to appreciate despite escalating geopolitical risks? At that time, many traders were waiting for a pullback to settle their foreign exchange, only to see the rate enter the 6.7 range.

         The main drivers of this round of RMB appreciation include both internal and external factors.

         On the internal side: Exports remain strong, and corporate demand for foreign exchange settlement is robust. Building on a year‑on‑year export growth of 14.7% in the first quarter, dollar‑denominated export growth in April remained high at 14.1%. Once the key 6.80 level was breached, a large number of export companies chose to settle their foreign exchange at that point, further pushing up the RMB exchange rate, creating a cycle of “appreciation → settlement → further appreciation.”

         On the external side: The easing of tensions in the Middle East and the meeting between the Chinese and US presidents have boosted market optimism, sharply reducing the strong safe‑haven demand that had previously supported the US dollar. Meanwhile, the Japanese government’s recent intervention in the foreign exchange market has strengthened the yen, driving a broad appreciation of Asian currencies, including the RMB.

Several institutions currently expect the RMB to appreciate further.

         In a report released on May 8, Goldman Sachs noted that the RMB is undervalued by more than 20% against the US dollar and raised its forecast for the RMB. The bank expects the RMB to continue strengthening over the next year, reaching 6.8 in three months, 6.7 in six months, and 6.5 in one year.

         Mizuho Securities analysis suggests that the easing of Middle East tensions has boosted market confidence in the RMB, as expectations of a possible peace agreement between the US and Iran have lifted sentiment across Asian markets. The firm expects the RMB to reach 6.80 this quarter and climb to 6.65 by the end of the year.

         On May 11, Huatai Securities released research on exchange rates, maintaining its view that the RMB will appreciate by 4‑5% annually against the US dollar, and forecasting a range of 6.4‑6.5 within 12 months.

         For export companies, RMB appreciation means squeezed profits. However, negotiating price increases with long‑standing customers on the grounds of appreciation is not an easy task; sometimes traders are forced to make a difficult choice between “protecting profits or protecting orders.”

         Yet Goldman Sachs’ report puts forward a view: the sensitivity of China’s economy to exchange rate movements is undergoing a structural decline. On the one hand, China’s export structure is upgrading toward high‑tech, high‑value‑added products, which are less sensitive to price changes due to their lower substitutability. On the other hand, Chinese exporters are strengthening their foreign exchange risk management, including increasing hedging and raising the share of RMB settlement in cross‑border trade.

         Taken together, the report concludes that expectations of a gradual RMB appreciation are compatible with the prospect of sustained strong export growth. There is no need to worry excessively that appreciation will undermine export momentum or intensify deflationary pressures.