TAIPEI: Yuan deposits held by Taiwan-based banks dropped to a 16-month low of 308.34 billion yuan (US$46.76 billion) last month, as demand for the Chinese currency softened on depreciation expectations and lower savings rates, the central bank said yesterday
The figure represented a 0.43 percent decline from a month earlier.
“Customers terminated time deposits denominated in yuan after domestic lenders lowered savings rates,” Sinclair Kung , deputy director of the bank’s foreign exchange department, said at a news conference.
Interest rates for yuan deposits hit 4 percent after Taiwanese lenders vied to attract yuan savings, Kung said, adding that the offer no longer held after differences between onshore and offshore yuan rates tapered off.
The ongoing slowdown in the Chinese economy and a series of interest rate cuts by the People’s Bank of China weighed on depreciation expectations for the Chinese currency, Kung said.
According to the central bank’s tallies, as of last month, yuan deposits fell 0.14 percent from the previous month to 270.23 billion yuan at local lenders’ domestic banking units and dropped 2.43 percent to 38.11 billion yuan at their offshore banking units, as retail and corporate customers were downbeat on the yuan’s prospects.
The softening interest in yuan deposits was not limited to Taiwan, as the monthly drop in yuan deposits in South Korea reached 34.5 percent last month and stood at 4.79 percent in Hong Kong in April, Kung said.
The balance in South Korea amounted to 10.5 billion yuan last month and more than 720 billion yuan in Hong Kong in April.
The yuan might receive short-term support from Britain’s referendum on whether to leave the EU on Thursday next week and the US Federal Reserve’s decision on Wednesday to hold interest rates unchanged, Kung said.
In the long run, most analysts have conservative views about the Chinese currency in line with China’s economic state, Kung said.
