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Chinese yuan deposits fall for 4th straight month

2018/06/18 17:18:22

Taipei, June 18 (CNA) Chinese yuan deposits held by banks operating in Taiwan were down at the end of May for a fourth straight month, in part because of the yuan's recent weakening against the U.S. dollar, according to the central bank.

The balance of yuan deposits received by Taiwanese banks, including negotiable certificates of deposit (NCDs), totaled 311.28 billion yuan (US$48.34 billion) at the end of May, down 4.28 billion yuan from the end of April.

Ho Pei-chen (賀培真), a specialist with the central bank, said many investors in Taiwan decided not to renew their yuan time deposit contracts after the agreements expired amid the falling yuan.

The Chinese currency depreciated about 1.24 percent against the U.S. dollar in May.

Another factor was the use of yuan by some Taiwanese life insurance companies to finance their overseas investments in May, leading to a smaller balance in their yuan deposit accounts at the end of the month.

The central bank said yuan deposits taken by banks' domestic banking units (DBUs) fell to 279.78 billion yuan as of the end of May, down from 284.76 billion yuan at the end of April, while the balance held by banks' offshore banking units (OBUs) rose to 30.49 billion yuan, up from 29.79 billion a month earlier.

Ho said that because analysts widely anticipated the U.S. Federal Reserve would raise its key interest rates in a policymaking meeting scheduled for mid-June, investors tended to cut their holdings in non-U.S. dollar currencies, including the yuan, in May.

As the market expected, the Fed raised interest rates by 0.25 percent last week to range between 1.75 percent and 2.0 percent, the highest since September 2008, as the U.S. economy remains on the path to a strong recovery.

With the Fed expected to raise interest rates further for the rest of this year, non-greenback currencies are likely to move lower, analysts said.

Meanwhile, yuan-denominated remittances totaled 100.58 billion yuan in May, down from 112.72 billion yuan in April, with remittances through banks' DBUs at 60.74 billion yuan and OBUs at 39.84 billion yuan, according to central bank data.

Local banks' DBUs have been able to conduct yuan-denominated transactions, including taking yuan deposits, since February 2013, when Taiwan's central bank lifted a ban on the practice amid improving cross-Taiwan Strait financial exchanges at the time.

Before the ban was lifted, only the OBUs of Taiwanese banks were allowed to take yuan deposits and conduct other yuan transactions.

Since the opening, the highest the yuan deposit balance of banks in Taiwan has been was 338.22 billion yuan in June 2015.

(By Chiu Po-sheng and Frances Huang)