The higher cost in yuan exchange services after a wider buy-sell spread will have some psychological impact on local depositors, although the interest payable on yuan deposits will still hinge largely on the market's outlook on the currency.
'The rate of increase of yuan deposits may slow down,' said Billy Mak Sui-choi, an associate professor at the department of finance and decision science of Hong Kong Baptist University. 'But the impact may not be very big.'
'People will continue to make yuan deposits if they expect the currency to continue to firm,' he said.
Hong Kong's yuan deposits rose 72 per cent from last year-end to more than 57.58 billion yuan in the first quarter, considering that Hong Kong dollar deposits yield almost zero return while the yuan is expected to continue strengthening.
On Monday, Bank of China (Hong Kong), the city's yuan clearing bank, widened the spread between the Hong Kong dollar buying and selling rates of the yuan from 10 basis points to 75 basis points for member banks.
BOCHK said it made the move after the China Foreign Exchange Trading System, the mainland's foreign exchange trading platform, increased the transaction fee.
