Several Chinese banks are lifting dollar deposit rates, in some cases above US benchmarks. Bankers say the moves are attracting cash and could temper gains for the yuan. The hikes come as Beijing steps up efforts to rein in a currency rally.
Several Chinese banks are sharply lifting dollar deposit rates, in some cases above US benchmarks, according to Reuters. Bankers describe the moves as unusually swift, and say they are attracting cash and could temper gains for China's yuan.
More than six banks, from state-owned to joint-stock and foreign lenders, have hiked dollar deposit rates to levels not seen since at least 2023 in recent weeks, according to people at the banks. They spoke anonymously because they were not authorised to speak to the media.
Why higher dollar rates could slow the yuan
Higher dollar deposit rates encourage savers and exporters to park cash in dollars rather than low-yielding yuan, potentially slowing a prolonged currency rally that has begun to squeeze exporters' wafer-thin margins. The rally has lifted the currency about 10% against the dollar since early 2025, and the People's Bank of China on Tuesday announced it would raise the foreign currency reserves banks must hold.
One person at a state bank said deposit rates there rose by about 80 basis points over the past few months to as high as 4.5% in late October, compared with rates around 4.8% at US banks, according to LSEG data. The person said: "The current exchange rate is not particularly favourable for exporters" (in the Reuters report).
At another state bank, one-year rates now top 4% on balances above $50,000, according to a person with direct knowledge of the rates. Meanwhile, Chinese banks have repeatedly cut yuan deposit rates, leaving them at just 0.95% at major state lenders.
Policy motives remain unclear
Reuters could not determine whether policymakers had directed banks to raise the rates. The bankers said they were not told why, and the PBOC, which typically issues informal guidance on such rates to state banks, did not respond to a faxed request for comment.
The increases in part reflect rising rates in the US, where the Federal Reserve in September raised its overnight rate window target by 25 bps to 3.75-4%. However, Chinese rates have moved faster than the Fed and, for the first time in years, are competitive with offshore rates, which in Hong Kong are just below 4%.
Record trade surpluses have steadily lifted the yuan for almost two years, and it hit a four-year peak of 6.6449 per dollar last week. Foreign currency deposits reached a record $1.2 trillion at end-September, up 17.7% from a year earlier, PBOC data showed.
Source: Investing.com (Reuters)
Trading involves risk.
Risk Disclaimer
