July 4, 2014 / 3:00 AM / 3 years ago

South Korea yuan bank deposits hit record high in June

SEOUL, July 4 (Reuters) - Yuan deposits at banks in South Korea inched up by a net $640 million in June to a record high of $11.97 billion, central bank data showed on Friday, but the rate of increase slowed due to an increase in yuan borrowing costs.

It was the 12th straight month for yuan deposits to reach a record high, according to data from the Bank of Korea, but yuan deposit increases have been slowing since reaching $2.02 billion in April and $1.42 billion in May.

The data comes a day after Chinese President Xi Jinping agreed with South Korean President Park Geun-hye on a series of steps aimed at spurring offshore use of the yuan, including launching direct trading of the yuan against the won.

A Bank of Korea official said, however, the establishment of a direct currency market between the two currencies would not necessarily lead to an increase in yuan deposits in local banks as it would take time for the market to become fully active.

Foreign currency deposits on a whole fell by $680 million in June to $58.95 billion as of the end of last month, mainly on a fall in U.S. dollar deposits.

U.S. dollar-denominated deposits fell by $1.42 billion in June to $40.67 billion, accounting for 69.0 percent of total foreign-currency deposits at end-June, compared to the yuan’s 20.3 percent, the data showed. (Reporting by Christine Kim; Editing by Eric Meijer)

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