The RMB to USD exchange rate increased by 600 basis points three days after the holiday, and some companies' willingness to settle foreign exchange has strengthened. There was no集中结汇.

The Chinese New Year holiday has just ended, and the RMB exchange rate has surged in a strong rally. In just three trading days, both onshore and offshore RMB against the US dollar have rapidly appreciated, with a phased increase of nearly 600 basis points. The rates have broken through the 6.87, 6.85, and even 6.83 levels, reaching the highest since April 2023.

“Actually, the RMB has been maintaining a good appreciation trend this year, and it’s become even more obvious in the past two days,” said a foreign exchange trader at a Hong Kong-based investment bank in an interview with Caixin. One reason is the overall weakness of the US dollar; another is that, as expectations of appreciation strengthen, companies that previously held onto their foreign currency are accelerating their conversion, creating a pro-cyclical force.

A financial officer at a large Chinese-funded enterprise in Hong Kong said that the RMB’s appreciation trend has changed their recent financial practices. Since the second half of last year, they have consciously reduced their dollar debt ratio and switched to RMB hedging. By the end of last year, they accelerated dollar settlement to reduce exchange rate risk and also to pay off RMB debts. The company’s foreign currency risk exposure is controlled at around 40%.

Several interviewees believe that the current appreciation is supported by fundamentals and actual corporate needs, remaining within a reasonable range, and they expect that regulatory authorities are less likely to intervene externally.

Conversion surge drives nearly 600 basis points increase in three days

From a time perspective, the recent appreciation over the past three days is not an isolated event.

Data shows that since the RMB exchange rate broke the 7.0 level at the end of December last year, the RMB has continued its appreciation trend into 2026, remaining below 7.0 against the dollar, with the offshore rate peaking at 6.9957. Since February, the RMB’s midpoint against the dollar has appreciated by over 300 basis points, with both onshore and offshore RMB/USD rates appreciating by more than 2% this year.

“The RMB has been on a solid appreciation trend this year, and it’s become even more apparent in the past two days,” the Hong Kong trader further analyzed. Over the past few years, large trade surpluses have accumulated significant USD assets for export companies, with holding costs concentrated in the 7.0–7.2 range. Currently, the exchange rate is well below this cost range, and many positions are in “floating losses.” If companies do not convert their foreign exchange holdings promptly, paper losses could erode profits, especially for listed companies and large institutions. Under the backdrop of strengthened appreciation expectations, “panic-driven conversions” have objectively amplified exchange rate volatility.

The financial officer also noted that while many companies can hedge risks through forward contracts, from an enterprise assessment perspective, converting now allows for more timely realization of income and profit targets.

A relevant business person at a major bank’s Guangdong branch told Caixin that, over the past three days, there hasn’t been a concentrated wave of companies converting currency, but the number of companies converting since the beginning of the year has increased year-on-year. Under the combined influence of appreciation expectations and lower interest rates than the US dollar, many cross-border companies engage in currency hedging arbitrage, increasing the demand for conversions to some extent.

According to GF Securities’ estimates, since 2022, Chinese companies have an outstanding foreign exchange settlement scale of approximately $725 billion to $1.14 trillion, with an average of about $932.2 billion.

Appreciation remains reasonable but is a “double-edged sword”

In 2025, China’s trade surplus reached a record high of $1.19 trillion, providing a solid market foundation for RMB appreciation.

Data from the State Administration of Foreign Exchange shows that in January 2026, banks settled $286.3 billion and sold $206.5 billion in foreign exchange, resulting in a net settlement surplus of $79.8 billion; bank foreign-related receipts and payments had a surplus of $82.1 billion, maintaining a pattern of net cross-border capital inflows.

However, the financial officer also pointed out that RMB appreciation driven by increased settlement benefits corporate profits on paper, but excessive appreciation could hurt export companies’ margins. They believe that the exchange rate will fluctuate within a certain range once it reaches a balanced level.

Several other interviewees also noted that if the appreciation accelerates too quickly, the central bank might intervene through guiding the midpoint rate or adjusting offshore liquidity to counteract the cycle. Currently, the appreciation remains within a reasonable range supported by fundamentals, with little expectation of external intervention.

Caixin also observed that on February 25, the People’s Bank of China issued two tranches of offshore central bank bills via the Hong Kong Monetary Authority’s CMU bond auction platform, totaling 50 billion RMB. Market analysts interpret this as a moderate support for the RMB exchange rate, helping to improve the offshore RMB bond yield curve.

Outlook: appreciation amid two-way fluctuations

Looking ahead, market institutions generally believe that the RMB may face seasonal disturbances in the short term but will remain relatively strong in the medium term.

GF Securities’ chief economist Guo Lei’s team suggests that in February and March, the RMB often faces seasonal downward pressure, and the US dollar tends to be stronger during this period. However, current settlement support has not been fully released. Based on current rates, about 79.8% of foreign exchange holdings are in floating loss, indicating that this round of conversions may not be a short-term spike but related to a “delayed settlement cycle” rebound.

Under this scenario, institutions expect the RMB to maintain a relatively strong pattern with two-way fluctuations from March 2026 through the second quarter, possibly stabilizing around 6.85–6.87 by the end of the year.