Commerzbank analysts say CNY appreciation outpaces USD interest rate advantages, reducing depreciation pressure despite policy shifts.
The Chinese Yuan has appreciated nearly 3% against the US Dollar this year, defying expectations tied to the People’s Bank of China’s recent easing of USD deposit rate caps. Analysts note the CNY’s gains have outpaced interest rate differentials, limiting the impact of the policy change.
The 1-year time deposit rate differential between USD and CNY stands at 2.2%, slightly below the 2.7% gap for 1-year government bonds. However, the CNY’s annualized 3-month appreciation trend has consistently exceeded these differentials since mid-2023, making USD deposits less attractive.
Foreign currency deposits at Chinese banks have continued rising, but the CNY’s upward momentum suggests limited depreciation risks in the near term. The trend is expected to persist, according to market observers.