Is a Weaker Dollar and Stronger Renminbi Inevitable? The Data Does Not Support a One-Way Conclusion

There is no one-way collapse in the share of international reserves

IMF COFER data shows that among allocated foreign exchange reserves, the U.S. dollar’s ​​share rose from 56.42% in the fourth quarter of 2025 to 57.13% in the first quarter of 2026; the RMB’s share rose from 1.95% to 1.99%. Both can rise in the same quarter as other currency shares, asset prices and exchange rate valuations also change.

This set of figures cannot be used to predict the U.S. dollar against the yuan in the next month, nor can it prove that the international status of the U.S. dollar will only rise from now on. It only shows that the "continued rapid decline in dollar share" does not hold true in the latest quarterly data for which verification is available.

Exchange rate depends not only on monetary policy

When U.S. interest rates fall, the relative return advantage of U.S. dollar assets may narrow; but if global risk events occur at the same time, U.S. assets become relatively stronger, or other economies relax faster, the U.S. dollar can still strengthen.

The RMB is also affected by interest rate differentials between China and the United States, trade balances, cross-border capital flows, domestic economic expectations and policy management. Export surplus can provide a source of foreign exchange, but it will not determine the exchange rate alone; cross-border investment and resident asset allocation can affect demand in the other direction.

Chinese companies behave more like “hedging” than “unilateral bets”

The State Administration of Foreign Exchange disclosed that the rate of companies using foreign exchange derivatives for exchange rate risk management in the first half of 2026 was 35.3%, an increase of 5.3 percentage points from the first half of 2025. The numbers do not mean that companies are collectively forecasting in the same direction, but that more companies are treating uncertainty as an operational risk that needs to be managed.

Naturally hedging, forwards, swaps and options work differently when a company has foreign currency revenues and expenses. If you hedge all at once based on just one annual rate forecast, you may be left with over-hedging after volume changes.

What families need to align most is the future liability currency

US dollar fund commitments, Hong Kong dollar living and business expenses, RMB operating expenses and overseas education or property expenses have different timetables. Matching asset currencies with liability or commitment currencies is often more executable than forecasting a long-term exchange rate endpoint.

If there is a definite dollar liability in the next two years, all dollar liquidity should not be transferred away because of a weak dollar. On the contrary, if income and assets are concentrated in US dollars for a long time, while family and corporate responsibilities are dispersed in RMB, Hong Kong dollars and other currencies, then what is needed is period-by-period rebalancing, rather than waiting for the market to confirm the trend.

G70 Viewpoint: Rewrite the “general trend” into a testable scenario

We do not agree to write down the depreciation of the US dollar and the appreciation of the RMB as an inevitable outcome. The available approach is to prepare for at least three scenarios at the same time: a weakening US dollar, range oscillation, and a stronger US dollar due to risk events. For each scenario, examine how the family's future payments, collateral, business margins, and investment positions would change.

The goal of exchange rate management is not to make predictions right every time, but to ensure that households and businesses can still complete their responsibilities on time when predictions are wrong.

Important note

This article does not constitute foreign exchange, derivatives or asset allocation advice. The reserve currency share, spot exchange rate and the family's actual exchange cost are different indicators; the explanation of market transmission in this article is an analytical framework, not an exchange rate forecast.