The Chinese yuan rebounded as the market anticipates significant economic stimulus measures with the National People’s Congress meeting this week. Reports indicate that Beijing is considering approving up to 10 trillion yuan in additional debt issuance over the next few years to support its slowing economy. This move is expected to provide liquidity and encourage investment, potentially leading to the stabilization of the yuan after recent fluctuations. The possibility of increased fiscal support may create a bullish outlook for the yuan, as a stronger economy could support demand for the currency and attract foreign investment. The yuan could also benefit from a weaker dollar as US political uncertainty weighs on the currency.

In the fixed-income market, the potential issuance of substantial debt volumes could impact yields and investor sentiment. Introducing more debt could lead to higher bond yields, strengthening the yuan over the short term. Additionally, if the stimulus successfully revives economic growth in the medium to long term, the Chinese currency could find stronger support.

Source: London Loves Business