S Korea says unfazed by yuan deposit spike

South Korea's central bank chief said Thursday that a -recent spike in domestic deposits of the Chinese yuan in South Korea was not a major cause for concern, suggesting that no serious measure was planned to limit local yuan accounts.

South Korean policymakers have been monitoring the surge in yuan holdings, which became popular as domestic investors sought the comparatively higher yields offered by the currency. Yuan deposits by local residents stood at an equivalent $7.56 billion at end-January, compared with $880 million at end-September.

"I don't think this is a cause for concern," Bank of Korea Governor Kim Choong-soo told reporters at a briefing following the central bank's monetary policy meeting on Thursday. "There has been an increase in arbitrage trade because of the de-leveraging in the Chinese financial system."

The South Korean won is not directly convertible into the yuan. The yuan deposits were built through a structured product scheme in which a local brokerage sold asset-backed commercial paper to raise won.