S Korea yuan deposits rise

Yuan deposits at banks in South Korea rose by an equivalent $2.0 billion during April to hit a record $9.9 billion, official data showed on Monday, as investors continued to favor the yuan's higher interest rate.

It was the third largest monthly gain on record for yuan deposits in South Korea, which have risen fast from late last year, South Korea central bank data showed.

A Bank of Korea official said the rise in yuan deposits was expected to continue for the time being as yuan deposits still offered at least 50 basis points higher return than won deposits, but gave no further details.

Media reports said last month that financial authorities in South Korea had lifted their warning on banks to refrain from increasing their yuan deposits, although there has been no official announcement on the matter.

What makes yuan deposits in Seoul different from those in Singapore or London is that the won cannot be directly converted to yuan, making yuan deposit transactions more complicated.

Yuan deposits in Seoul were built through a structured product scheme in which a local brokerage sold asset-backed commercial paper to raise won from local institutions such as insurance companies.