Chinese yuan-denominated deposits held by banks operating in Taiwan stopped a six-month losing streak in August for the currency partly due to many banks' efforts to hike yuan deposit rates in a bid to attract more funds, according to the local central bank.
Furthermore, the bank said that a scheduled inclusion of the yuan into the International Monetary Fund's reserve basket -- the Special Drawing Rights (SDRs) -- in October has also boosted investors' interest in holding the yuan.
Citing data, the central bank said that the balance of yuan deposits, including negotiable certificates of deposit (NCDs), held by banks in Taiwan totaled 305.82 billion yuan (US$45.85 billion) as of the end of August, up 214 million yuan or 0.07 percent from a month earlier.
In February 2013, Taiwan's central bank lifted a ban against local banks' domestic banking units (DBUs) conducting yuan-denominated transactions, including yuan deposits.
Before the ban was lifted, only offshore banking units (OBUs) of Taiwanese banks had been allowed to take yuan deposits and conduct other yuan transactions.
At the end of August, yuan deposits (including NCDs) held by the DBUs of Taiwanese banks reached 271.65 billion yuan, up 433 million from a month earlier, while yuan deposits (including NCDs) taken by the OBUs of banks in Taiwan fell 219 million ti 34.17 billion yuan, he central bank said.
It said that many banks in Taiwan recently came up with high interest rates for their yuan time deposit contracts, which lured investors to raise their holdings in the yuan.
Among the banks which generously paid handsome interest on the yuan, Bank SinoPac (??) had raised its one-month time deposit rate on the yuan to 5.5 percent and also boosted the interest rate on three-month yuan deposits to 4 percent.
In addition, Jih Sun International Commercial Bank (????) had offered a 2.65 percent interest rate on its one-year yuan time deposits. These banks' offers on the yuan deposits were much higher than the one-year time deposit rate of around 1 percent for the Taiwan dollar.
China's inclusion into the SDRs will become effective on Oct. 1. The SDRs, created by the IMF in 1969, is intended to supplement IMF member countries' reserves. Before the inclusion of the yuan, the value of the SDR is currently based on the value of four key currencies: the U.S. dollar, the euro, the Japanese yen, and the British pound.
The move to have the yuan on board has boosted hopes that it will become more international and that its popularity with investors will rise in the global market, which had led those in Taiwan to buy more yuan, market analysts said.
Source: Focus Taiwan News Channel