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Yuan deposits at Taiwanese banks fall by 0.75% in Nov

Yuan deposits at Taiwanese banks fall by 0.75% in Nov

TAIPEI: Yuan deposits at Taiwanese banks fell for the fifth consecutive month to 316.71 billion yuan (US$48.9 billion) last month, down by 0.75 percent from October, as local investors cut holdings despite its recent inclusion as a reserve currency by the IMF, the central bank said yesterday.

“Yuan deposit interest slipped further last month, as investors favored the greenback or other foreign currencies,” it said.

The adjustments came even though the IMF on Nov. 30 admitted the yuan to the special drawing rights currency basket, which was previously comprised of the US dollar, pound sterling, yen and euro.

Pundits had forecast a rise in yuan demand following the inclusion, which is to take effect in October next year and allow the market to decide its value.

However, onshore yuan softened 0.83 percent last week alone, intensifying depreciation expectations as the yuan grows market-oriented and unpredictable.

Yuan deposits dropped 0.3 percent to 271.19 billion yuan at domestic banking units and slid 3.35 percent to 45.53 billion yuan at offshore banking units, as retail and corporate customers both shared the weak sentiment, the central bank said.

Expectations of interest rate hikes by the US Federal Reserve this week helped drive funds to the US dollar and weighed on the yuan, the central bank said.

Numerous institutes have projected the yuan would gain against its US counterpart in the medium and long-term, but would weaken in the short run.

As of last month, the yuan shed all its gains against the New Taiwan dollar recorded in the past year, the central bank said, warning against potential foreign exchange losses going forward.