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Hong Kong Monetary Authority (HKMA)

Hong Kong yuan deposits hit 15-month low

PUBLISHED : Saturday, 29 September, 2012, 12:00am
UPDATED : Saturday, 29 September, 2012, 2:32am

Yuan deposits fell last month in Hong Kong to the lowest level since May last year as weakened expectations for the currency's appreciation offset rules allowing non-residents to buy the currency.

Yuan deposits fell 1.9 per cent from July to 552 billion yuan (HK$675.3 billion), the Hong Kong Monetary Authority said yesterday.

The total has dropped 75 billion yuan since reaching a record 627 billion yuan at the end of November last year.

Banks started offering yuan-account services from August 1 to non-residents, enabling them to buy an unlimited amount of the currency at the offshore rate.

The city's lenders handled 254 billion yuan of trade settled in the currency last month, a 14 per cent increase from July, according to HKMA data.

"Expectations of yuan appreciation were quite weak so even though non-residents were allowed to buy, they might not have been so eager," said Frances Cheung, a strategist at Credit Agricole. "There's a positive side to the data, with Hong Kong having handled more yuan-denominated trade in August, which is important for its status as the world's major offshore yuan centre."

The yuan has strengthened 1.1 per cent this quarter as global central banks from the United States to Japan eased monetary policies and on speculation that China planned more economic stimulus measures. The yuan rose 0.28 per cent to 6.2849 per US dollar in Shanghai yesterday, the biggest gain since March. It touched 6.2835, the strongest level since the government unified the official and market rates in 1993.

Analysts predict the yuan will end the year at 6.32 per US dollar, a 0.4 per cent annual depreciation against the greenback, according to the median estimate in a survey. In Hong Kong's offshore market, 12-month non-deliverable yuan forwards climbed 0.2 per cent to 6.406 per dollar yesterday, a 1.9 per cent discount to the onshore exchange rate, according to data compiled by Bloomberg.

Non-residents need permission to transfer yuan to the mainland. The city's permanent residents can buy up to 20,000 yuan a day at the onshore rate.