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China Business News: "At the end of July, I opened an account with Bank of East Asia. On the day of opening, the fixed deposit interest rate for US dollars was 5.2% for six months and 5.1% for one year," said Bingbing (a pseudonym), a resident of Shenzhen. "The minimum deposit is 2,000 US dollars, with no asset requirements. I thought about depositing more in a couple of days, but the next day the interest rates dropped to 5.1% for six months and 4.9% for one year. Recently, I noticed the rates have fallen again, so I decided not to buy for now and regret not acting sooner."

The situation Bingbing observed is not an isolated case. As the RMB fixed deposit interest rates continue to decline, depositors are increasingly interested in foreign currency deposits, especially US dollar deposit products. This year, several banks, including Evergrowing Bank and Bank of Beijing, have introduced US dollar deposit products with relatively high interest rates, with the one-year rate reaching up to 5%.

However, as the Federal Reserve's interest rate cut approaches, many banks have reduced their US dollar deposit interest rates. Currently, products with an annual interest rate exceeding 5% are rare.

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Multiple banks have lowered US dollar deposit interest rates.

"Currently, with a minimum deposit of 10,000 US dollars, the one-year term annual interest rate can reach 4.9%. Previously, the RMB deposit interest rates kept falling, and there were quite a few customers consulting and purchasing US dollar fixed deposits. The US dollar fixed deposit interest rate will also drop in September, so if you want to buy, you can do it as soon as possible," a customer manager at Evergrowing Bank in Chengdu told China Business News on August 29.

Wang, a resident of Beijing, has US dollar fixed deposits maturing at the end of September this year. Speaking of the decline in US dollar fixed deposit interest rates, Wang is somewhat confused.

"At the beginning of the year, I deposited two fixed deposits in US dollars at the Bank of Beijing. One is for one year, with an annual interest rate of 5.2%, maturing at the beginning of next year; the other is for six months, maturing at the end of September this year. Recently, I inquired at several banks, and the interest rates for US dollar fixed deposits are all below 5%. I haven't decided where to put the deposit after it matures," said Wang.

Jiangsu Bank has also joined the ranks of banks reducing US dollar deposit interest rates. It was previously reported that at the beginning of August, Jiangsu Bank's one-month deposit with a minimum deposit of 10,000 US dollars had an interest rate of 5.05%, and the interest rates for three-month, six-month, and one-year deposits were 4.95%, 4.8%, and 4.7%, respectively.

On September 4, the reporter saw on the Jiangsu Bank App that the current fixed deposit interest rates for one month, three months, six months, and one year are 4.85%, 4.75%, 4.6%, and 4.5%, respectively. Among them, the one-month term interest rate has the largest decrease, dropping by 20 basis points.

Why have multiple banks lowered US dollar deposit interest rates?Associate Professor Liu Chunsheng from Central University of Finance and Economics told China Business News reporter that currently, with the cooling of inflation in the United States and increased pressure on the job market, the market widely expects the Federal Reserve to implement interest rate cuts in the future (especially in September). This expectation will lead to a downward trend in the central rate of U.S. dollars, which will then affect the adjustment of domestic U.S. dollar deposit interest rates.

"Timely reduction of U.S. dollar deposit interest rates helps to stabilize the net interest margin of banks. With relatively stable U.S. dollar loan interest rates, reducing U.S. dollar deposit interest rates can reduce the interest cost paid by banks, thereby maintaining or improving the level of net interest margin. Banks' early reduction of U.S. dollar deposit interest rates is also a strategy for market response and risk management. By adjusting interest rates in advance, banks can avoid the risk of interest rate mismatch after the Federal Reserve's rate cut, maintain the attractiveness of U.S. dollar deposit products, and prevent the outflow of U.S. dollar deposits." Yuan Shuai, the founding initiator of the New Smart Generation New Quality Productivity Meeting Room, told the reporter.

There are still U.S. dollar deposit products with an annual interest rate of over 5%

The reporter found that although many banks have reduced their U.S. dollar deposit interest rates, there are still U.S. dollar deposit products with an annual interest rate close to or above 5%.

Taking Dongguan Bank as an example, on September 4, the reporter saw on the Dongguan Bank App that the bank's U.S. dollar on-demand deposit (3 months - 1 year) has a maturity annual interest rate of 5.1% - 5.15%, with a minimum purchase of $1,000, and the subscription deadline is September 30, 2024.

"Currently, our bank's 3-month U.S. dollar fixed deposit interest rate is 4.9%, the 6-month rate is 4.5%, and the 1-year rate is 4%, but the account opening threshold is relatively high." On September 2, a customer manager of DBS Bank told the reporter.

It is worth mentioning that to cater to the enthusiasm of depositors, many banks have also launched high-interest U.S. dollar deposit products recently.

On August 16, Zhangzhou Rural Commercial Bank announced a limited-time sale of U.S. dollar fixed deposit products from August 20 to 22, with a deposit period of 1 month. Among them, the starting deposit amount is $1 million - $3 million (inclusive), with an annual interest rate of 5%; the starting deposit amount is $500,000 - $1 million, with an annual interest rate of 4.9%.

Chongqing Bank also announced on August 21 that it will launch U.S. dollar deposit products with terms of 3 months, 6 months, and 1 year, with interest rates of 5%, 5%, and 4.9% respectively. The starting deposit amount is $5,000, and the expected maturity returns are $125, $250, and $490 respectively.

Regarding the reasons why many banks are marketing U.S. dollar deposits, Zhou Maohua, a macro researcher in the financial market department of China Everbright Bank, said that the interest rates on U.S. dollar deposits are related to the banks' operating needs for foreign exchange settlement and sales, as well as the trend of the U.S. dollar itself. From the trend, the interest rates on U.S. dollar deposits have been moderately reduced, but it is expected that they will remain at a relatively high level for a period of time. On the one hand, the recent slowdown in U.S. consumption and employment data continues to support the Federal Reserve's gradual transition to an interest rate reduction cycle; on the other hand, the relatively high inflation in the United States, and "sticky inflation" make the Federal Reserve cautious in its interest rate reduction decisions, and it is expected that the Federal Reserve will maintain a restrictive interest rate level for a longer period until it sees substantial changes in inflation and the job market.Investing carries risks, and caution is needed for US dollar fixed deposits.

"The reduction in US dollar deposit interest rates is a reaction of the financial market to expectations of the Federal Reserve's monetary policy. As expectations of the Fed's interest rate cuts strengthen, the global financial market may face a reconfiguration of capital flows and asset prices. For emerging market countries, this could mean more opportunities for capital inflows and stock market increases. However, potential risks of exchange rate fluctuations and capital outflows should also be vigilant," said Yuan Shuai.

For ordinary depositors, the risk of exchange rate fluctuations is also something that needs to be known and avoided. Dongguan Bank advises that due to the high risk of exchange rate changes, it is recommended to prioritize the use of existing foreign currency funds.

"In the 10-day period from August 15th to August 25th, due to exchange rate fluctuations, I have already suffered an exchange rate loss of more than 2,000 yuan (RMB, same below), with a profit of nearly 500 yuan during the period. In the end, the overall profit was negative, around 2,000 yuan," Wenwen (a pseudonym) from Shandong shared with the reporter her recent loss-making situation with US dollar fixed deposits.

Yuan Shuai believes that the future direction of the Federal Reserve's monetary policy will directly affect the trend of US dollar deposit interest rates. If the Fed continues to cut interest rates, domestic US dollar deposit interest rates will also continue to decrease; on the contrary, if the Fed pauses or turns to raising interest rates, US dollar deposit interest rates may remain stable or rise.

Zhou Maohua stated that the difference between US dollar and RMB deposit products lies in the different currencies, and due to different policies between China and the US, there are also differences in deposit interest rates. Although the interest rates for US dollar deposit products are high, the financing costs in US dollars are also high, and the US dollar exchange rate has fluctuated sharply in recent years, so potential exchange risks need to be guarded against.

"Investors, while focusing on US dollar deposit interest rates, also need to pay attention to the impact of exchange rate fluctuations on actual returns. In the case of significant fluctuations in the US dollar to RMB exchange rate, investors need to carefully assess their investment risks and take corresponding risk management measures," said Liu Chunsheng.