Annual interest rate of 5%! Can this type of deposit product still be used for redemption? Customers | interest rate hikes | US | investors | deposits | RMB | banks | deposit interest rates
"Last year, I deposited my idle US dollars in Jiangsu Bank's US dollar fixed-term account, which is about to expire. I looked around and plan to continue saving it," netizen Xiao An shared on social media.
The China Securities News reporter learned that the current three-month USD deposit interest rate for Jiangsu Bank with a minimum deposit of 10000 USD is 4.8%, and the one-year USD deposit interest rate is 4.9%; The interest rate for a 3-month USD deposit starting at $2000 is 4.6%, and the interest rate for a 1-year USD deposit is 4.7%.
The reporter found that against the backdrop of banks continuously lowering the RMB deposit interest rate, the current USD fixed deposit interest rate can still be maintained between 3.3% and 5.0%, which has great appeal. However, industry insiders remind that due to the uncertainty of future US interest rate hikes and multiple risks such as exchange rate fluctuations, it is not recommended for investors to blindly exchange currency to earn profits.
The annual interest rate for US dollar deposits can reach 5%
"A while ago, the interest rate for deposits over $50000 per year was 5.0%, which many customers are eager to pay. Starting from June 6th, it was lowered to 4.3%, but the interest rate for RMB deposits with the same term is less than 2.0%, which is still much higher. If you need to use foreign currency in the future, such as studying abroad or visiting relatives, you can now exchange some US dollars to deposit for a period of time and receive interest," a customer manager at Bank of China told reporters.
Since June, banks have launched a new round of interest rate cuts, following state-owned banks and joint-stock banks. Small and medium-sized banks are following up on the reduction of RMB deposit rates. In this context, the reporter's research found that although some banks have recently lowered the US dollar deposit interest rate, overall, the US dollar deposit interest rate is in the range of 3.3% to 5.0%, which still has a significant advantage over the RMB deposit interest rate.
Taking Suzhou Bank as an example, the current annual interest rate for USD 1-year fixed deposits in 2023 is as high as 5.0%, with a minimum deposit of USD 10000; The annual interest rate for USD 6-month term deposits in 2023 is 4.5%, with a minimum deposit of USD 10000. According to the official website, the listed interest rates for six-month and one-year RMB fixed deposits of the bank are 1.6% and 1.8%.
"Our bank's one-year fixed deposit interest rate for US dollars is 3.3%, with a minimum deposit of 5000 US dollars. Among RMB deposit products with the same term and limit, the annual interest rate for large deposit certificates is 2.2%, with a minimum deposit of 200000 yuan; the annual interest rate for regular fixed deposits is 1.85%." A customer manager in Fengtai District of Bank of Beijing told reporters. In addition, during the reporter's visit to bank branches, several account managers also recommended short-term structured deposit products pegged to the US dollar to the reporter.
Be cautious when using temporary foreign exchange to get on the train
"The interest rate for US dollar deposits is not as high as 5% before. Personally, I suggest that if there is no rigid use in the future, there is not much need to specifically exchange and deposit US dollars to earn interest. If the deposit does not exceed 50000 US dollars, the interest rate will not be much higher, and exchange rate risk needs to be considered," a staff member of a state-owned bank told reporters.
It is widely believed in the industry that as the pace of interest rate hikes by the Federal Reserve slows down, there is limited room for subsequent increases in US dollar deposit rates. Since May, banks have slightly lowered the US dollar deposit interest rate. "At present, the frequency of interest rate hikes in the United States is slowing down, and we may lower the US dollar deposit interest rate in the future, but we have not received specific notification at this stage," a customer manager at Suzhou Bank told reporters.
"The high interest rate of US dollar deposits is due to the continuous interest rate hikes in the United States in recent years, and the US federal fund interest rate is at a high level. For ordinary investors, if they have US dollars in hand, they can make US dollar deposits and lock in a higher yield. Considering the uncertainty of US interest rate hikes and the multiple risks such as the change of the RMB exchange rate against the US dollar, it is not recommended that investors temporarily exchange for high interest deposits." Dong Ximiao, the chief researcher of China Merchants Union, told reporters that investors should pay attention to the fact that US dollar deposits do not always maintain a high interest rate. If the US federal fund interest rate falls back, the US dollar deposit interest rate may decline.
Li Mingjin, Senior Investment Advisor at Jufeng Investment Consulting, also reminded investors that when exchanging for US dollars, they not only need to consider possible exchange rate fluctuations but also whether the Federal Reserve will raise interest rates again. Before exchanging foreign exchange, it is necessary to consider the potential losses caused by the price difference between the purchase and settlement of foreign exchange after maturity, and investors need to make cautious decisions.
