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.

This article is from Times Finance. Author: Zhang Xinying

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 briefly touched lows of 6.8310 and 6.8266, respectively. This means that since breaking the 7.0 mark at the end of 2025, the RMB exchange rate continued its appreciation trend into the new year, reaching a recent high.

Against the backdrop of accelerated RMB appreciation, it may not be good news for investors holding USD assets. Early last year, many investors painstakingly exchanged RMB for USD, hoping that high-yield USD financial products and deposits would 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, as it approaches maturity, 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 added that USD financial products were very popular early last year, and she was tempted by the nearly 5% high interest, so she exchanged currency without considering exchange rate risks.

Looking at the beginning of 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 still buy short-term USD deposits. The current interest rate for three months is about 3.45%, so I’ll wait and see how the exchange rate moves.”

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

“Currently, USD deposits with around 3% interest still yield more than RMB deposits, but with RMB appreciation expectations, exchange losses can easily wipe out interest or even principal. Investors should clarify their investment goals—if they have real USD needs like studying abroad or overseas property, they can buy foreign exchange in batches during exchange rate pullbacks; if not, they shouldn’t speculate 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.”

Image Source: TuChong Creative

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, from the high of 7.42 in April 2025 to the intra-day low of 6.82 on February 26, 2026, the USD to RMB exchange rate has fallen by about 8% in less than 12 months.

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,” while others turn to safe-haven assets. “I don’t want to keep fussing over the exchange rate anymore. After maturity, I plan to buy some gold,” said Li Ming (pseudonym), a post-90s investor who previously purchased USD deposits.

Under the dual pressures of RMB appreciation expectations and declining USD interest rates, USD deposits—once considered “hot”—are now returning 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. Importantly, these investors have clear USD usage scenarios and are not merely speculating for arbitrage.

“One of my children might go abroad in the future, so I need USD as a backup. Currently, the fixed deposit interest rate is around 3%, which seems quite cost-effective,” said an investor.

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

Times Finance found that since the Federal Reserve began cutting interest rates 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 manager at 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, offered interest rates of 3.65%, 3.60%, and 3.35% for 3, 6, and 12 months, respectively, for single deposits of $1,000 or more.

What’s Next for the Exchange Rate?

From a macro perspective, the unilateral strength of the USD seems to have ended for now. Analysts suggest that in 2026, the USD exchange rate center is likely to decline overall, but due to multiple factors, it will show a “generally weak with intermittent rebounds” complex pattern, with the exchange rate center moving downward but not in a single direction.

CICC’s latest research report on February 27 also pointed out that the reconstruction of the international monetary order remains the main theme for global assets in 2026, recommending “overweight Chinese stocks and gold,” reflecting cautious institutional attitudes 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 foreign exchange sales from 20% to 0%.

Industry insiders expect that RMB exchange rate will enter a new phase of “bilateral fluctuation and moderate appreciation.” Tian Lihui explained to Times Finance, “In the short term, the PBOC’s reduction of the forward foreign exchange risk reserve ratio to zero aims to prevent rapid unilateral appreciation. Coupled with seasonal declines in foreign exchange demand and the upcoming dividend season for Chinese concept stocks in Q2, the RMB’s 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-way 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 are sufficient to keep the exchange rate at a reasonable and balanced level.

Wang Qing, chief macro analyst at Orient Securities, also noted that in the short term, given 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 is low, and the RMB is expected to remain relatively strong in the near future.