(Yicai Global) Feb. 9 -- Experts have advised investors to keep in mind that they could lose money to exchange rate swings after shifting funds into US dollars, which can command very attractive deposit rates at some banks in China.

Depositors should consider the potential loss from fluctuating forex rates and trading costs before converting Chinese yuan-denominated wealth management products into US dollars, a client manager at a bank said. The risk can be lowered by opening dollar deposits for just a year or less, the person noted.

The Beijing branch of Xiamen International Bank is offering 5.35 percent on one-year deposits of between USD7,000 and USD50,000, the highest among all banks, a client manager at the lender told Yicai Global.

Interest rates on one-year dollar deposits can reach 5 percent at some state-owned lenders, such as Bank of Communications and Industrial and Commercial Bank of China, as well as small- and mid-sized banks like Bank of Beijing, Bank of Nanjing, and Bank of Jiangsu. Smaller amounts can be deposited with smaller banks.

The US Federal Reserve raised the target range for its funds rate by 25 basis points to between 4.5 percent and 4.75 percent last month, the highest since October 2007, following a series of hikes starting last year. That underpins the high interest rates available on US dollar deposits in China.

Banks raise rates to attract more dollar deposits because China mainly uses them to invest in US government bonds, a source at a foreign bank told Yicai Global. The exchange rate and the willingness of foreign traders to settle foreign exchange will also drive banks to make interest rate changes, the person added.

The Chinese yuan is trading at about 6.7 versus the US dollar, in line with fundamentals, said Chen Kang, a bond analyst at Northeast Securities. But the fundamentals will not support the yuan strengthening to the high level seen early last year over the medium term, Chen noted.

China has clear advantages over the US as their two economies recover, so the yuan will likely rise to 6.6 against the dollar, said Li Chao, chief economist at Zheshang Securities.

Editor: Futura Costaglione