China's biggest banks are cutting US dollar deposit rates as the most bearish outlook for the yuan since 2009 prompts mainland companies to hoard the greenback. Industrial and Commercial Bank of China cut its one-year dollar deposit rate by 0.2 percentage point last week to 0.8 per cent, while Agricultural Bank of China and Bank of China lowered similar rates, according to the lenders' websites. Slowing capital inflows have caused a cash squeeze that has driven the one-year government bond yield higher in each of the past six weeks, the longest run of increases since June 2010. Deteriorating prospects for growth in the world's second-largest economy drove a 50 per cent jump in foreign exchange savings in China during the first seven months of this year, a period in which yuan deposits climbed 9 per cent. "Yuan depreciation expectations have dampened demand for dollar loans and boosted deposits in dollars," said Zhao Qingming, a senior analyst in Beijing at China Construction Bank, the nation's second-biggest lender. "Banks have to lower dollar deposit rates to cut their costs." The increased supply of dollars sent Shanghai's six-month interbank rate for the dollar to 1.23 per cent on July 30, the lowest since March 2010. The gauge fell 3.2 percentage points this year to 1.4 per cent. The yuan appreciated 4.7 per cent last year against the greenback and is 30 per cent stronger than it was when a US dollar peg ended in July 2005. But so far this year, the unit has fallen about 0.8 per cent against the dollar as Europe's sovereign debt crisis sapped demand for Chinese exports. Shipments rose 1 per cent from a year earlier in July, the least in six months. As yuan appreciation bets dwindled, the mainland has experienced capital outflows of between US$20 billion and US$40 billion each month since late last year, Nick Chamie, head of global foreign exchange strategy at Royal Bank of Canada, estimated in a recent report. Chinese companies had long viewed dollar-denominated loans as a "cheapening source of funds", Chamie wrote. He said they are now accumulating the greenback to address foreign exchange risks on their balance sheets as the dollar strengthens against the yuan.