China's major state banks have lowered their dollar deposit rates for the second time in a month, seven banking sources with direct knowledge of the matter said, as authorities have stepped up efforts to arrest a slide in the yuan.
Traders and analysts said policymakers, worried that a prolonged yuan slide could both discourage foreign investment and spur an outflow of funds abroad, want to bring down dollar deposit rates - which typically track offshore rates - towards domestic rates, which have been cut to aid the flagging economy.
"It shows that the move is to narrow the interest rate advantage of the U.S. dollar in onshore markets," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.The lower rates could both discourage households from putting savings into higher-yielding dollar deposits and nudge Chinese firms, especially exporters, to settle foreign exchange receipts in yuan.
The PBOC, China's central bank, has recently moved to brake the yuan's slide against the dollar, setting stronger-than-expected daily fixings for the currency, while state banks have also been spotted selling dollars on occasion in both the onshore and offshore markets, trading sources said.the big state banks had lowered such rates as much as 100 basis points from the previous ceiling of 5.3%.
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