On the afternoon of May 7, the offshore RMB against the U.S. dollar broke through the 6.80 mark during intraday trading, touching a low of 6.7977, the strongest level since February 10, 2023. The onshore RMB also rose to as high as 6.8006 on the same day, coming within one step of 6.80 before closing at 6.8015. Since peaking around 6.70 at the beginning of 2023, the RMB has entered a prolonged period of two-way fluctuation, with 6.80 consistently acting as a key psychological resistance level for further appreciation.

The Drivers Behind Yuan Appreciation

The core forces driving this latest round of appreciation can be divided into external and internal factors.

The most direct external factor is the weakening U.S. dollar. As of May 7, the U.S. Dollar Index stood at 97.86, falling below the 98 level and down 0.42% year-to-date. Since late April, the dollar index has continued to weaken amid easing Middle East tensions and growing market expectations of Japanese government intervention in currency markets, driving broad appreciation across major non-dollar currencies, including the RMB.

A deeper external driver comes from expectations surrounding Federal Reserve policy. According to CME FedWatch data, the probability of the Federal Reserve keeping rates unchanged through June stands at 96%, but markets are already pricing in two to three rate cuts later this year. Rising expectations for Fed easing have directly weakened the dollar’s yield advantage, creating systemic upside room for non-dollar currencies.

Geopolitical developments are also supporting the RMB. Safe-haven capital that previously flowed into the dollar due to Middle East tensions has started to reverse as expectations for a U.S.–Iran reconciliation improve. Brent crude settled at $100.06 per barrel on May 7, down 1.19% and significantly below recent highs above $110. Lower oil prices reduce imported cost pressures for China as a major crude importer, directly improving trade conditions and opening room for stronger foreign exchange settlement demand.

On the domestic side, economic fundamentals and export performance remain the core support for yuan strength. China’s GDP grew 5.0% year-over-year in the first quarter of 2026, accelerating by 0.5 percentage points from the previous quarter. Total imports and exports of goods reached RMB 11.84 trillion in Q1, up 15% year-over-year, marking the strongest quarterly growth rate in nearly five years. Domestic consumption and investment continue recovering, exports remain resilient, and the current account surplus continues to serve as an anchor for the exchange rate.

On top of this, improving expectations surrounding China–U.S. trade relations have further reduced the RMB’s risk premium. Over the past year, RMB appreciation has largely been driven by declining trade uncertainty and falling China-related risk premiums. If China’s risk premium continues to decline and expectations for returns on RMB-denominated assets improve further, the RMB’s appreciation trend could receive ongoing support. In addition, if Trump’s planned visit to China proceeds and progress is made on tariff-related issues, this would also benefit the RMB.

From a trading perspective, once the exchange rate approached 6.80, exporters accelerated dollar settlements while some short positions were forced to stop out, combining to push the currency through the key level. Meanwhile, importers largely chose to wait on the sidelines during the appreciation trend, preventing immediate dollar-buying demand from providing meaningful resistance. The offshore RMB remained below 6.80 for more than 30 minutes, trading volume expanded significantly, the dollar index simultaneously broke below 98, and the spread between offshore and onshore yuan widened beyond 40 basis points, forming a classic synchronized breakout structure.

Going forward, 6.75 is likely to become the next major reference point for bulls and bears. The future direction of the dollar, developments in the Middle East, and the actual progress of high-level China–U.S. interactions will jointly determine how far this appreciation cycle can continue. The author emphasizes once again that exchange rates are influenced by highly complex factors. Going forward, the RMB is still likely to fluctuate in both directions, with both appreciation and depreciation possible, and investors should avoid making one-sided bets.