December 6, 2013 / 3:01 AM / 4 years ago

REFILE-Yuan deposits surge in South Korea on arbitrage

(Corrects to remove word “EMBARGOED” from headline)

SEOUL, Dec 6 (Reuters) - Arbitrage activity sent yuan-denominated deposits held in South Korea surging last month thanks to a combination of bullish views on the Chinese currency and abundant dollar liquidity in South Korea, central bank data showed on Friday.

Foreign-currency deposits in South Korea rose to $48.61 billion by the end of November from $46.12 billion a month before, led by yuan deposits more than doubling to $4.17 billion from $1.64 billion, Bank of Korea data showed.

The figures cover deposits by South Koreans and foreign residents for six months or longer. The Bank of Korea said in a statement the rise in yuan-denominated deposits was linked to arbitrage activity by institutional investors.

An official at the central bank said dollar liquidity in the country has been abundant as South Korea continues to post sizeable current account surpluses.

Yuan-denominated deposits began soaring in September, when the outstanding amount rose to $0.88 billion by the end of the month from $0.3 billion at end-August. The amount jumped again to $1.64 in October.

Still, the bulk of the foreign-currency deposits was denominated in U.S. dollars, accounting for 79.8 percent of the total versus 8.6 percent for the yuan, the data showed. (Reporting by Choonsik Yoo; Editing by Shri Navaratnam)

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