At least five lenders have lifted rates to or above the US SOFR benchmark, in a move traders say is designed to slow yuan appreciation
Several Chinese banks have raised the interest rates they offer on US dollar deposits, according to sources familiar with the matter, in what currency traders interpret as an effort to absorb dollar liquidity and put a brake on the yuan’s rapid appreciation.
At least five commercial banks, spanning state-owned lenders and smaller joint-stock banks, have made the adjustments in recent weeks. Two sources said their institutions are now offering dollar deposit rates at or above the US Secured Overnight Financing Rate, currently at 3.61%. One source described an active push to attract dollar deposits from new clients.
Whether the People’s Bank of China informally guided the moves is unclear. The PBOC did not respond to requests for comment.
The adjustments vary by bank and apply to either corporate or retail clients, but the direction is consistent across institutions. The move also represents a relaxation of a dollar deposit rate ceiling imposed in 2023, when the yuan was under depreciation pressure. The situation has reversed sharply: the yuan has gained more than 3% against the dollar so far this year, raising concerns among exporters about competitiveness.
“The higher rates could soak up dollars and prevent the yuan from rising too fast,” said one trader at a foreign bank.
Gary Ng, senior economist for Asia Pacific at Natixis, offered a less interventionist reading: “This reflects the broad increase in global US dollar funding costs. If the dollar deposit rate is too different from the rest of the world, money may flow out of the banking sector into other wealth management products.”
China’s foreign exchange deposits stood at $1.15 trillion at the end of April, up roughly 20% from a year earlier.