March 1, 2013 / 6:11 AM / 5 years ago

UPDATE 1-BoC HK extends yuan deposits to promote redback's rise

(Adds details, comments)
    By Michelle Chen
    HONG KONG, March 1 (Reuters) - Bank of China Hong Kong
, the yuan clearing bank in Hong Kong, has offered yuan
time deposit rates with tenors of up to three months to
participant banks, in a move to broaden the banks' yuan
investment channels.
    It has also raised the overnight interest rate of yuan
deposits for participant banks to 0.648 percent from 0.629
percent. Both measures take effect from March 1.
    "Our purpose is to improve the service quality as a yuan
clearing bank, and broaden the channel for yuan participant
banks to allocate their renminbi," a spokeswoman for Bank of
China Hong Kong told Reuters.
    According to Reuters page, interest rates offered by
the clearing bank stand at 2.2 percent, 2.3 percent and 2.4
percent for yuan deposits with tenors of one month, two months
and three months, respectively.
    The newly-announced yuan clearing bank in Taiwan - Bank of
China  Taipei branch - also said it would
offer yuan deposit rates with tenors of up to one year from
March 1.
    "These measures will help lift the profitability of
participant banks' yuan business, and banks may then be able to
offer higher returns to their clients," said Raymond Yeung, an
analyst at ANZ in Hong Kong.
    Beijing has stepped up efforts to promote the use of  yuan
in international trade and investment this year, granting both
Taiwan and Singapore a yuan clearing bank around the Chinese New
Year in February. 
    The participation of Industrial and Commercial Bank of China
  in Singapore's yuan clearing business will
break the monopoly of Bank of China as the only yuan clearing
bank in the offshore markets.
    Analysts say the arrangements offered by BoC HK are in some
degree aimed at protecting its yuan market share and to better
position itself for future competition when more offshore yuan
centers and clearing banks open. 
    Hong Kong has been at the forefront of promoting the yuan to
global corporates and investors. Yuan deposits in the Asian
financial hub increased to 624 billion yuan ($100 billion) in
January, after stagnating last year.
    As the world's second-largest economy, China has growing
ambitions for its "redback" RMB to become a global reserve
currency equivalent to the U.S. dollar.    
    The Chinese central bank is in talks with the Bank of
England to establish a reciprocal three-year renminbi/sterling
currency swap agreement, which if realized, will be the first
swap line China has with a G7 country.

    Yuan deposit rates offered by Bank of China Taipei branch
and Bank of China Hong Kong:
    Tenor      BoC TP (pct)      BoC HK (pct)
     O/N         0.648              0.648
     7D          2.545                /
     14D         3.085                /
     1M          2.860               2.2
     2M            /                 2.3
     3M          2.590               2.4
     6M          2.815                /
     9M          2.950                /
     1Y          3.085                /
($1 = 6.2213 Chinese yuan)

 (Reporting by Michelle Chen; Editing by Anne Marie Roantree and
Eric Meijer)
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