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China's four major banks raise foreign currency deposit rates
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14:28, September 18, 2009

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Bank of China(BOC), which has the largest proportion of domestic foreign currency assets, announced on September 17 that it would raise the domestic small deposit rates of USD and Euros that day. Four state-owned banks all have raised the foreign currency deposit rates in September.

According to the website of BOC, it decided to adjust the domestic small deposit rates of USD and euros beginning from September 17, 2009. Specifically, U.S. dollar's one-year deposit rate increased to 0.95 percent, the one-year deposit rate of euros raised to 1.1 percent. The BOC's increased rates were similar with other three major state-own banks'(Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China). However, the BOC didn't adjust the interest rate of Hong Kong dollar. At present, the BOC's one-year interest rate of HK dollar is 0.45 percent, lower than other peers' average level of 0.7 percent.

The tightening of foreign currency funds is the incentive for increasing interest rates of banks. The credit data in August released by PBoC( the People's Bank of China, China's central bank) showed that the foreign currency deposits and loans had a noticeable change.

The expected pressure of RMB appreciation is also the pressure of encouraging banks to increase the interest rates. The forex analyst from a foreign country said that the long-term trend of market implied that the USD market prospects would be worrisome. The expectations of RMB appreciation made people reluctant to deposit in foreign currency, which lead to the bank's demand of attracting funds by raising foreign currency deposit rates.

After all four major state-owned banks increasing the foreign currency deposit rates, the joint-stock banks may follow their steps. Under the context of the tightened foreign exchange funds, Chinese banks will increase the interest rates for foreign currency.

By People's Daily Online



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