Chinese yuan deposits held by local banks last month rose 3.66 percent from one month earlier to 244.49 billion yuan (US$37.65 billion), the highest in six-and-a-half years, as Taiwanese regained interest in the currency, which has appreciated against the US dollar, the central bank said yesterday.
“The explosive increase in yuan deposits had much to do with popular expectations that the US dollar is to remain weak for quite a while,” central bank foreign exchange official Gloria Chen (陳婉寧) said, noting that the monthly changes had been small in the past two years.
The expectations prompted institutional and retail investors to raise their holdings in major reserve currencies other than the greenback in pursuit of better returns, Chen said.
Photo: CNA
The latest yuan balance is the highest since April 2014, she said.
Yuan deposits at domestic banking units grew 1.97 percent to 208.94 billion yuan and soared 14.81 percent at offshore banking units, the central bank’s data showed.
Demand and time deposits climbed higher as institutional accounts built up yuan positions, Chen said.
Chen linked the increase to yuan-based dividend incomes, equity investment recovery, debt redemption and loan remittance.
It is common for portfolio managers to adjust asset positions in line with their expectations of currency movements, the official said, adding that retail investors do the same to protect the value of their portfolios.
Consequently, investors have trimmed holdings in US dollars, Chen said.
Retail investors have been less active, favoring a wait-and-see attitude, she said.
Bank SinoPac (永豐銀行) offered the highest interest rate of 3.05 percent for yuan-denominated one-month time deposits, while Jih Sun International Bank (日盛國際商銀) offered the highest interest rate of 2 percent for three-month deposits, Chen said.
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