Chinese yuan deposits dips to 68-month low

Taipei-Chinese yuan deposits held by Taiwanese banks as of the end of October fell to the lowest level in 68 months as banks lowered their interest rates on yuan deposits, a move that made the currency less attractive, according to the central bank.

While the yuan appreciated against the U.S. dollar in October amid eased trade tensions between the United States and China, other currencies, including the Taiwan dollar, enjoyed higher growth against the greenback to lure investors away from the Chinese currency, the bank said.

Data compiled by the central bank showed the balance of yuan deposits at banks in Taiwan as of the end of October totaled 259.76 billion yuan (US$37.11 billion), down 5.19 billion yuan or 1.96 percent from the end of September.

The October figure was the lowest since February 2014, when the balance of yuan deposits held by Taiwanese banks stood at 247.05 billion yuan, the data indicated.

The central bank said the decline in the yuan deposits came after both retail and institutional investors moved their funds from yuan accounts at a time when banks cut their interest rates on the Chinese currency, with the cuts following falling deposit rates for the yuan.

In October, Sunny Bank offered 2.65 percent interest on one-year yuan deposits, the highest level among banks in Taiwan, but the October rate was shy of 2.8 percent it offered in September, while other banks largely lowered their rates on yuan deposits.

In February 2013, when cross-strait financial exchanges were on the rise under the then-Kuomintang government, the central bank lifted its ban on the domestic banking units (DBUs) of local banks conducting yuan-denominated transactions.

Before the ban was lifted, only the offshore banking units (OBUs) of Taiwanese banks were allowed to accept yuan deposits or conduct other yuan transactions.

In June 2015, the balance of yuan deposits at Taiwanese banks hit an all-time high of 338.22 billion yuan. However, after the balance fell below the 300 billion yuan mark at the end of 2018, the amount has mostly trended down.

Amid the decline in the overall yuan deposit balance, yuan deposits in DBUs fell 4.31 billion yuan from a month earlier to 228.74 billion yuan, while the balance of OBUs also fell 883 million yuan from September to 31.02 billion yuan, the central bank said.

The more visible strength of other currencies in the region against the U.S. dollar relative to the yuan prompted institutional investors to cut their yuan holdings in the month by about 4.2 billion yuan, which placed more downward pressure on yuan deposits.

For example, the Taiwan dollar rose 1.96 percent against the U.S. dollar in October, stronger than the yuan, which appreciated against the greenback by 1.32 percent.

The central bank said retail investors' yuan deposits dropped about 100 million yuan in October as many were attracted to 10 newly unveiled yuan denominated mutual funds, while some others parked their funds in Taiwan dollar deposits or other currency deposit accounts.

Meanwhile, yuan-denominated remittances in October totaled 101.51 billion yuan, down from 117.15 billion in September, with remittances through DBUs totaling 60.88 billion yuan, down from 66.75 billion yuan a month earlier, and those via OBUs reached 40.63 billion, down from 50.04 billion yuan, according to the central bank.

In October, Jih Sun International Bank offered 2.45 percent on nine-month yuan deposits and SinoPac Bank offered 2.58 percent on six-month yuan deposits, the highest rates among local banks, the central bank said.

In the month, Mega International Commercial Bank offered 2.1 percent and 2.4 percent, respectively, on its one month and three month yuan deposits, also the highest among local banks.

Source: Focus Taiwan News Channel