Chinese banks sharply hike dollar deposit rates to curb yuan rally, bankers say
More than six Chinese banks have sharply raised dollar deposit rates in recent weeks, in some cases above US benchmarks, in an effort to slow the yuan's prolonged rally and ease pressure on exporters, bankers told Reuters.
Several Chinese banks are sharply lifting dollar deposit rates, in some cases above US benchmarks, in unusually swift moves that bankers say are attracting cash and could temper gains for China's yuan, according to reports.
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' margins, bankers told Reuters on condition of anonymity as they were not authorised to speak to the media.
More than six banks, ranging from state-owned to joint-stock and foreign lenders, have in recent weeks hiked dollar deposit rates to levels not seen since at least 2023, the bankers said. The moves signal an end to a de facto cap on state banks' dollar rates and suggest efforts to slow the rising yuan are stepping up.
At one state bank, deposit rates rose by about 80 basis points over the past few months to as high as 4.5 per cent in late October, the highest level since 2023. That compares with rates around 4.8 per cent at US banks, according to LSEG data. Another state bank hiked dollar deposit rates twice in two weeks, with one-year rates now topping 4 per cent on balances above US$50,000, some 120 basis points higher than a few months earlier when state lenders first pushed rates above a 2.8 per cent cap imposed in 2023.
A third state bank offered to match the US secured overnight financing rate, currently at 3.97 per cent, for some of its most creditworthy clients' dollar deposits, said a separate source. Several foreign banks are offering dollar deposits at rates above 4 per cent, the bankers said. The increases have moved faster than the US Federal Reserve's September hike to 3.75–4.00 per cent and are competitive with offshore rates in Hong Kong, which are just below 4 per cent, potentially drawing dollars from abroad.
"Higher USD deposit rates may be set with the intention to retain dollar deposits and maintain steady dollar funding," said Lynn Song, chief economist for Greater China at ING. "With higher dollar deposit rates, it may discourage some exporters to convert accumulated dollar balances into yuan, which could reduce some of the yuan appreciation pressure."
The hikes come amid some of the strongest efforts yet to rein in a yuan rally that has lifted the currency about 10 per cent against the dollar since early 2025, with the People's Bank of China on Tuesday announcing it would raise the foreign currency reserves banks must hold. 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 US$1.2 trillion at end-September, up 17.7 per cent from a year earlier, PBOC data showed.