Shanghai (Reuters) – Chinese banks reduce interest rates offered on US dollars after the central bank asked her to do so, perhaps reduce dollar concealment and also support Yuan’s weakening, sources said.
Investors and exporters for a continental measure have built deposits worth almost trillion dollars because of higher yields in the USA -UI Yuan’s slide.
Two banking sources with direct knowledge of the matter said that in the last few weeks, banks in China (PBOC) said they had to reduce deposit rates in dollars in the last few weeks.
These guidelines seem to be focused on the discouragement of the further increase in the dollars deposits and to encourage more conversion of those dollars to Yuan, sources said.
“We have guidelines from the superiors that we need to lower the deposit rates for the dollar, and many of our peers have already done so,” said one of the banking sources, adding that regulators seem concerned about the share of money held on the coast in the dollars.
PBOC did not immediately respond to Reuters’ comment request.
Some banks have announced a reduction in the rate. East Asia bank announced on Wednesday that it would reduce the deposit rate for a one -year -old dollar to $ 20,000 or more to 3.5% compared to the current 4.4% early March.
Nanjing Bank said earlier this month that it had reduced interest rates on dollar deposits above 3000 to 2.1% for quarterly tenors with 4.3% set in January.
Chinese capital control and tendency to retention citizens in dollars meant that the dollar deposits bring less than in international markets, where deposits of 3 months in the dollar are currently about 4.5%. But they are still larger than the yield on the domestic currency, with quarterly Yuan three-month rates of about 1% or lower.
“The Yuan stops are so low now, everyone is doing trade wearing dollar deposits,” said another source.
Devis deposits increased to $ 892.4 billion last month, which is the highest level since April 2023, household deposits amounted to $ 146.1 billion, which is 18% over a year earlier, and corporation deposits increased to $ 451.9 billion, according to PBOC.
Chinese commercial banks sold the most foreign exchange to their clients last month since July, official data showed, showing growing demand for a foreign currency. Conversion ratio – a measure that measures household readiness and corporation for sales of dollars for Yuan – has fallen to the lowest level in seven months.
Yawning the gap in the yield
The wide gap between the higher American interest rates and the fall of Chinese yields was a factor that destroys Yuan’s appeal with investors on the coast. That gap in yield hit his widest level in January.
