The RMB breaks above 6.84, and those with high-interest fixed deposits in USD are panicking! A 4.5% interest rate can't offset exchange rate losses, with some seeing a principal of 100,000 decline by over 2,000.

The foreign exchange market will stir again at the beginning of 2026.

On February 26, the USD to RMB and USD to offshore RMB rates both hit intraday lows of 6.8310 and 6.8266, respectively. This means that since breaking the 7.0 barrier at the end of 2025, the RMB exchange rate continued its appreciation trend into the new year and reached a recent high.

Against the backdrop of accelerating RMB appreciation, it may not be good news for investors holding USD assets. Early last year, many investors painstakingly exchanged RMB for USD, expecting high-yield USD financial products and savings to outperform the domestic market. However, reality delivered a heavy blow: many USD products appeared to offer annualized yields of 3%-5%, but after converting to RMB, the depreciation of the exchange rate not only wiped out all interest gains but also caused principal losses.

“Last February, when the exchange rate was around 7.3, I bought a one-year USD fixed deposit at a foreign bank with 100,000 RMB, with a deposit rate of 4.5%. Now it’s about to mature, and if I convert at around 6.8, I won’t make a profit—my principal will actually lose over 2,000 yuan,” said Ms. Liu (pseudonym) from Jiangsu, to Times Finance. She noted that USD financial products were very popular early last year, and she was tempted by the nearly 5% high interest, so she exchanged currency and invested without paying attention to exchange rate risks.

Looking at 2026, for investors holding USD assets, the most troubling question is: what should they do with this money? Ms. Liu told Times Finance, “I can’t convert now. After maturity, I might continue to buy short-term USD deposits. Currently, the interest rate for about three months is around 3.45%, so I will keep observing the exchange rate situation.”

For investors still holding USD assets, Tian Lihui, director of the Nankai University Financial Development Research Institute, told Times Finance that the core principle is to return to “exchange rate neutrality” and abandon arbitrage mentality.

“Currently, around 3% interest on USD deposits still exceeds RMB deposits, but under the expectation of RMB appreciation, exchange losses can easily wipe out interest or even principal. Investors should clarify their investment purpose—if they have real needs like studying abroad or overseas property, they can buy foreign exchange in batches during exchange rate corrections; if not, they should avoid speculation solely based on interest rate differentials. Second, they should establish a diversified allocation concept, balancing foreign and domestic assets, stocks, bonds, and commodities to smooth volatility.”

USD Depreciation Hurts USD Asset Holders

In 2025, the USD index experienced its most significant annual decline since 2017, nearly 10%. As 2026 begins, the market generally expects continued weakness. Looking back, the USD against offshore RMB fell from a high of 7.42 in April 2025 to a intraday low of 6.82 on February 26 this year. In less than 12 months, the USD/RMB exchange rate has fallen by 8%.

Faced with the current “loss upon currency conversion,” many investors have started seeking alternatives. Some, like Ms. Liu, choose short-term deposits and “wait and see”; others turn their attention to safe-haven assets, saying, “I don’t want to bother with the exchange rate anymore. After maturity, I plan to buy some gold.” Li Ming (pseudonym), a post-90s investor who previously bought USD deposits, told Times Finance.

Under the dual pressures of RMB appreciation expectations and declining USD interest rates, USD deposits once considered “hot” are now experiencing a shift from frenzy to rationality. However, Times Finance notes that some investors still see a significant interest rate advantage in USD deposits compared to RMB deposits and plan to buy USD during low-interest periods. Notably, these investors have clear USD usage scenarios and are not merely engaging in speculative arbitrage.

“Maybe my child will go abroad in the future, and I will need USD for backup. Now, the fixed deposit interest rate is around 3%, which seems quite cost-effective,” said an investor.

It is worth noting that USD deposits with an annualized interest rate above 4% have become “extinct” in the market, with rates generally returning to the “3” range.

Times Finance found that since the Federal Reserve began its rate cut cycle in 2025, many banks’ one-year USD deposit rates have generally fallen to around 3%, significantly lower than at the start of last year. Products offering over 4% interest are now rare. However, some products still offer advantages over RMB deposits, with certain annualized yields exceeding 3.5%.

Recently, a client manager from Standard Chartered Bank told Times Finance that from February 1 to 28, qualified new customers could open 3-month, 6-month, and 1-year USD fixed deposits with annual interest rates of 3.7%, 3.6%, and 3.5%, respectively, with a minimum deposit of $20,000.

Capital Bank (China) also launched the “Youli Deposit” personal USD deposit product, which, from February 24 to March 1, allowed customers to open fixed deposits of at least $1,000 with interest rates of 3.65% for 3 months, 3.60% for 6 months, and 3.35% for 12 months.

What’s Next for the Exchange Rate?

From a macro perspective, the unilateral strength of the USD seems to have come to a temporary end. Analysts suggest that the USD exchange rate in 2026 is likely to decline overall, but due to multiple factors, it will show a “generally weaker with intermittent rebounds” complex pattern, with the overall center of the exchange rate shifting downward but not experiencing a single-sided decline.

CICC’s latest research report on February 27 also pointed out that the restructuring of the international monetary order in 2026 remains a main theme for global assets, recommending “overweight Chinese stocks and gold,” reflecting a cautious stance toward USD assets.

On the other hand, amid the accelerating RMB appreciation, the People’s Bank of China has signaled a cooling stance. On February 27, the PBOC announced that to promote the development of the foreign exchange market and support enterprises in managing exchange rate risks, it would from March 2, 2026, lower the foreign exchange risk reserve ratio for forward sales from 20% to 0%.

Industry insiders expect that RMB exchange rate will enter a new phase of “two-way fluctuation and moderate appreciation.” Tian Lihui told Times Finance, “In the short term, the PBOC has lowered the forward sales risk reserve ratio to 0 to prevent rapid unilateral appreciation. Coupled with seasonal decline in foreign exchange demand and the upcoming dividend season for Chinese concept stocks in Q2, the RMB appreciation rate will slow significantly. The next key level may be around 6.75, but it will be a gentle oscillation upward, not a one-sided trend.”

He also believes that in the medium to long term, if China-US trade relations stabilize and the domestic economy continues to recover, the RMB still has room to appreciate. However, regulatory tools to stabilize the exchange rate are sufficient to keep it relatively stable at a reasonable and balanced level.

Wang Qing, chief macro analyst at Orient Securities, also believes that in the short term, considering the expected continuation of external stabilization, China’s exports will maintain relatively rapid growth in Q1. With current market sentiment high, the possibility of a sharp rebound in the USD index in the near future is low, and the RMB is expected to remain relatively strong after the Spring Festival.