Yuan deposits in Hong Kong, which have fallen for five months in a row, are likely to continue to decline in the next three to six months, analysts say.
They expect the yuan to remain flat against the US dollar this year.
'There is only one reason for the decline in yuan deposits in Hong Kong; that is, people have changed their expectations as to the future direction of the yuan,' said Lu Ting, head of greater China economics at Bank of America Merrill Lynch.
Lu said the expectation of a slowdown in the yuan's strengthening against other currencies was why retail yuan deposits in Hong Kong had fallen from December to April.
Yuan deposits in Hong Kong stood at 552.4 billion yuan (HK$675.78 billion) at of the end of April after dropping for a fifth straight month, according to a Hong Kong Monetary Authority release last week. Such deposits dropped 0.34 per cent from March, a drop of 6.13 per cent from the 588.5 billion yuan in deposits in December, and 12 per cent lower than the peak of 627.3 billion yuan recorded on November 30.
'During the past few years, the yuan rose on average about 4 per cent a year, and it was almost 30 per cent up during the past seven years until September last year. That was why so many people exchanged other currencies into yuan,' Lu said.