China raises U.S., HK dollar deposit rates

China raises U.S., HK dollar deposit rates
Mon Aug 22, 2005 06:01 AM ET
(Recasts, updates with details, background)
BEIJING, Aug 22 (Reuters) - China raised interest rates on deposits of U.S. and Hong Kong dollars on Monday, a move that may help relieve upwards pressure on the yuan.
The increase of 0.375 percentage points, is the second in just over a month and the third since mid-May.
The previous increase was on July 21, the same day that China revalued the yuan by 2.1 percent and dropped its peg to the dollar in favour of a system that manages the exchange rate with reference to a currency basket.
Some $160 billion in foreign currency deposits are held in China and officials are worried they might be converted into yuan amid expectations that the Chinese currency could rise further.
The lastest increase in deposit rates, announced by the central bank and effective from Tuesday, raises the one-year rate for U.S. dollar deposits to 2 percent and for Hong Kong dollar deposits to 1.875 percent.
Analysts say Beijing is trying to make sure that local dollar rates track moves by the U.S. Federal Reserve, which has raised interest rates 10 consecutive times in its recent monetary tightening phase.