Market News

Chinese banks are raising dollar deposit rates, in some cases above U.S. benchmarks, in unusually swift moves that bankers say are attracting cash and could temper gains in the yuan.

Higher dollar deposit rates encourage savers and exporters to hold their cash in dollars rather than in lower-yielding yuan deposits. This could slow a prolonged currency rally that has begun to squeeze exporters' already thin profit margins.

More than six banks, ranging from state-owned institutions to joint-stock and foreign lenders, have raised dollar deposit rates in recent weeks to levels not seen since at least 2023, according to people at the banks.

All the bankers spoke to Reuters on condition of anonymity because they were not authorised to speak to the media.

The increases extend a months-long rise in dollar deposit rates in China. However, the latest moves, which have not previously been reported, indicate that the trend is accelerating, signal an end to a de facto cap on state banks' dollar rates and suggest that efforts to slow the yuan's appreciation are intensifying.

Reuters could not determine whether policymakers had directed banks to raise dollar deposit rates. The People's Bank of China (PBOC), which typically issues informal guidance on such rates to state banks, did not respond to a faxed request for comment.

The increases come amid some of the strongest efforts yet to rein in the yuan's rally, which has lifted the currency by about 10% against the dollar since early 2025. On Tuesday, the PBOC announced that it would raise the foreign currency reserves banks are required to hold.

"The current exchange rate is not particularly favourable for exporters," said one person at a state bank, where deposit rates had risen by about 80 basis points over the past few months to as high as 4.5% in late October.

That was the highest level since 2023 and compared with rates of around 4.8% at U.S. banks, according to LSEG data.

"To avoid being forced into converting FX back into yuan, banks can help offset some of the pressure," the person said.

Exporters and retail customers were taking advantage of the higher rates and making deposits, said two people at separate banks.

Chinese banks have been using their dollars to buy U.S. Treasuries, Reuters reported in September, marking a shift in their investment strategy. Some banks continued to do so, said a person at a joint-stock bank that has been buying Treasuries.

DEPOSIT RATES DISCOURAGE DOLLAR SALES

At another state bank, dollar deposit rates had been raised twice in two weeks, with one-year rates now exceeding 4% on balances above $50,000, according to a person with direct knowledge of the rates on offer.

The person said the higher rates were attracting deposits.