Economic Observer reporter Lao Yingying

Ms. Bai's US dollar fixed deposits are expected to mature in May and August 2026. Against the backdrop of a significant increase in the exchange rate of the Chinese yuan against the US dollar over the past year, these US dollar fixed deposits have caused her to incur a "floating loss" of nearly 40000 yuan.

Ms. Bai has been working in Shenzhen for over ten years, and in order to plan her child's future education expenses, she plans to use her savings for some stable investments. So, in 2024 and the first quarter of 2025, she exchanged nearly 80000 US dollars in batches at 7:30 in Chinese yuan, and purchased US dollar fixed deposits and US dollar wealth management products. Now looking at the numbers in her account, she couldn't help but laugh at herself: she perfectly bought at the "mountaintop" and became the "buying hero".

Since 2026, the exchange rate of the Chinese yuan against the US dollar has continued to strengthen, putting many investors who once pursued high interest deposits in the US dollar in a dilemma. Two years ago, the fixed deposit interest rate for US dollars once broke through 5%, attracting many investors to enter the market at the right time and concentrate on currency exchange between 7.2 and 7.3, allocating US dollar deposits and US dollar wealth management products with the intention of locking in higher returns.

However, with the continuous appreciation of the Chinese yuan, the losses caused by exchange rate fluctuations quickly "swallowed up" interest income: some people worked hard for a year and only made a "loneliness" - after considering exchange rate fluctuations and interest income comprehensively, it basically leveled off, with no profit or loss; Some people have even started to lose their principal.

On one hand, there is a market expectation that US dollar interest rates will continue to decline and the US dollar exchange rate will weaken in the medium term, while on the other hand, there is investors' obsession with cost recovery and stop loss anxiety. Ordinary investors holding US dollar assets are once again standing at a crossroads of choice.

A lesson on exchange rate risk

In mid-2024, the exchange rate of the Chinese yuan against the US dollar will hover around 7.26 to 7.28. At that time, the interest rate for RMB fixed deposits had continued to decline, while some banks' interest rates for US dollar fixed deposits still exceeded 5%. In addition, at that time, the market predicted that the Federal Reserve would soon begin a cycle of interest rate cuts, and the 5% fixed deposit rate for US dollars may soon be lowered.

It is in this context that Ms. Bai decided to seize the last moment before the start of the US dollar interest rate cut cycle to "get on board". Although the exchange rate cost when she purchased foreign exchange had already reached 7.30, she still resolutely exchanged $50000 and allocated a fixed deposit in US dollars with a yield of 5%.

In the first quarter of 2025, she exchanged another $27000 at a purchase cost of $7.34. At that time, the US dollar fixed deposit interest rate of most city commercial banks had dropped from over 4% to around 2%, but there were still some small banks with US dollar fixed deposit interest rates between 4.25% and 4.35%. This time, Ms. Bai bought two Bank of China Wealth Management USD daily opening products for 20000 US dollars, both of which are low-risk USD wealth management products that can be flexibly redeemed daily. The remaining funds, along with the aforementioned 50000 US dollars, will continue to be allocated to USD fixed deposits to "eat" interest.

Ms. Bai told the Economic Observer that in 2025, the yield of US dollar wealth management has declined compared to 2024, but the advantage lies in capital preservation and flexible daily redemption. Although the yield is lower than that of fixed deposits, it is still around 3.2%. In addition, the interest rate for US dollar fixed deposits is 4.25%. This product configuration, overall, has a much higher yield than RMB products.

But after the first quarter of 2025, the Chinese yuan will continue to appreciate. By the end of 2025, the Chinese yuan will have surpassed the 7.0 mark against the US dollar, and as of now, the Chinese yuan will continue to appreciate against the US dollar. During this process, Ms. Bai gradually realized the risks of purchasing foreign exchange products: the loss of nearly 40000 yuan was not only due to the product itself, but also to the losses caused by exchange rate fluctuations - the high exchange rate against the US dollar combined with the appreciation of the Chinese yuan, the exchange rate difference swallowed up all the interest income, and also resulted in a large loss of principal.

Mr. Liu from Foshan also experienced a profound lesson on exchange rate risk. He is luckier than Ms. Bai, as he did not lose the principal, but the over 200 dollars in interest earned from US dollar wealth management was completely "eaten up" by the loss caused by the exchange rate decline.

At the beginning of 2025, with the expectation of stable appreciation, Mr. Liu gradually converted RMB into US dollars in batches from May to June: the amount of each transaction was not large, ranging from 500 US dollars to 2000 US dollars. In the range of RMB to US dollars from 7.23 to 7.26, he gradually converted more than 7000 US dollars and bought the Bank of China Wealth Management QDII daily plan (in US dollars) with a risk level of R1 (low risk).

Mr. Liu told the Economic Observer reporter that the wealth management product he chose does not require market monitoring and has low risk, with stable interest payments almost every day. Days passed by day by day, and before he knew it, this financial investment had been with him for almost a year. Opening the position, the numbers are impressive: over 300 days, I have steadily earned more than $250 in interest. Upon careful calculation, he instantly felt heartbroken: the US dollars he had exchanged at around 7.25 at the beginning of 2025, and as the year passed, the Chinese yuan continued to appreciate. The hard-earned interest for the whole year was offset by the exchange rate loss caused by the decline of the US dollar, which was equivalent to being busy for nothing and truly earning a 'loneliness'.

What makes Mr. Liu even more anxious is that the market predicts that the RMB will continue to appreciate against the US dollar in 2026, and the remaining US dollars in his hands will continue to bear losses from the exchange rate decline. Looking at the position of over 7000 US dollars in his account, he was caught in a dilemma: should he bear the pain and settle the exchange to stop losses? Or should we continue to hold onto the US dollar and bear the exchange rate drop while enjoying interest?

Ms. Bai is also confused. Some people around her advise her to stop losses in a timely manner, while others advise her to hold on patiently. She has considered waiting until the Chinese yuan appreciates further against the US dollar and continuing to increase her holdings in exchange for US dollars to dilute costs, but she is also afraid that the Chinese yuan will continue to appreciate against the US dollar, resulting in even greater losses.

Do not bet on currency trends unilaterally

The reporter learned in the interview that in the past year, the interest rates of US dollar fixed deposits in commercial banks have been irregularly lowered, and the current interest rates of large and medium-sized banks are generally below 3%. Taking Industrial and Commercial Bank of China as an example, the interest rates for 3-month, 6-month, and 1-year US dollar deposits and withdrawals are 2.3%, 2.5%, and 2.8%, respectively.

The fixed deposit interest rate for US dollars in some small banks still exceeds 3%. For example, Guangdong Huaxing Bank has a minimum deposit amount of $1000, with interest rates of 3.25%, 3.15%, 3.25%, and 3.45% for 1 month, 3 months, 6 months, and 1 year, respectively; For example, Chongqing Three Gorges Bank offers interest rates of 3.7%, 3.65%, and 3.6% for 3-month, 6-month, and 1-year deposits with a minimum deposit of $5000.

In addition, foreign banks offer attractive interest rates for US dollar fixed deposits for some new account opening customers. For example, Standard Chartered Bank offers a minimum deposit of 20000 US dollars for newly opened customers with a total capital of 500000 RMB or its equivalent in foreign currency. The interest rates for 3-month, 6-month, and 1-year terms are 3.6%, 3.6%, and 3.5%, respectively.

In addition to US dollar fixed deposits, the yield of US dollar wealth management products has also been continuously declining. According to Puyi Standard data, as of the end of March 2026, the average annualized return rate of domestic cash management USD wealth management products in the past year was about 3.46%, a decrease from 3.99% in the same period of 2025. Taking Goldman Sachs ICBC Wealth Management ? Shengjing QDII daily open fixed income USD wealth management product phase 1 as an example, the annualized interest rate of the product in the past year is 3.7%.

So, what should investors like Ms. Bai and Mr. Liu do in the current situation?

Regarding this, Wang Pengbo, Chief Analyst of Broadcom Consulting, told Economic Observer reporters that investors should first rationally evaluate their capital utilization time and risk tolerance, and not rush to stop losses in the short term. If it is money that cannot be used for a long time, you can continue to hold it and use time to smooth out the impact of exchange rate fluctuations. If it is short-term idle money, the asset structure can be adjusted in batches according to one's own costs and financial situation to reduce the risk brought by a single currency.

Wang Pengbo emphasized that ordinary investors should not unilaterally bet on the trend of one currency. By combining multiple currencies and assets, balancing returns and risks, we can reduce the impact of single currency fluctuations on asset returns.

A Hong Kong family office investment advisor also told reporters that many people pursue high US dollar interest rates only seeing tempting interest rates, but overlook that the biggest risk of foreign exchange investment is never financial losses, but exchange rate fluctuations. Although there is indeed an expectation of RMB appreciation, the overall magnitude is relatively limited, and it is difficult to see a significant unilateral appreciation. Individual investors should not overly bet on RMB unilateral appreciation. If they excessively bet on RMB unilateral appreciation in order to earn short-term exchange rate differences, it is easy to make investment mistakes and ultimately lose more than they gain.

In fact, since entering 2026, the trend of the Chinese yuan has remained strong, rising by about 2.5% against the US dollar.

In response, a macro analyst from a joint-stock commercial bank told Economic Observer reporters that the short-term trend of the renminbi will still be affected by factors such as the pace of the Federal Reserve's policies, geopolitics, and the economic and trade relations between China and the United States, and there is a possibility of a temporary correction. However, the overall trend will still remain stable with an upward trend.

The macro analyst further stated that it is expected that the impact of oil prices on the US CPI will be limited, and the Federal Reserve will cut interest rates once or twice in the future. The long-term weakness of the US dollar remains unchanged, coupled with factors such as a mild recovery of the domestic economy, strengthened export resilience, high foreign trade surplus, and increased attractiveness of RMB assets. The fundamental support for the steady appreciation of the RMB in the medium term is expected, and the overall trend will be mainly characterized by gradual and fluctuating appreciation.