(Yicai) March 3 -- Anticipating future interest rate cuts by the US Federal Reserve, foreign banks in China have followed their local peers in lowering rates of their US dollar deposits.

The Chinese branches of overseas banks have trimmed their US dollar deposit rates by between 30 basis points and 1 percentage point, with the top annual rate dropping below 3.5 percent, Yicai calculated.

A number of Chinese banks, including Bank of Hangzhou and the Beijing branch of Bank of Nanjing, began slashing their dollar deposit rates late last month, with some even halting the sale of such products to avoid interest rate risks ahead of further cuts by the Fed.

Standard Chartered Bank in China offers US dollar deposits with an annual interest rate of up to 3.4 percent, a customer manager told Yicai. The lender has reduced the rates three times since the end of last year, when the highest on offer was 4.7 percent.

Both Chinese and foreign lenders are taking a precautionary stance, as the Fed is expected to further lower borrowing costs, a source in the banking sector told Yicai.

The highest-paying US dollar accounts at mainstream state-owned banks and joint-stock banks in the Chinese mainland has dropped below 3 percent a year, while those of most foreign banks and city commercial banks has fallen under 4 percent. Financial institutions believe that there is still room for further cuts.

With US dollar deposit rates in decline, customers are keener to exchange Chinese yuan for the greenback to to secure higher returns before further rate cuts take effect, a customer services manager at a foreign bank told Yicai. Some clients are even traveling to Hong Kong to buy US dollar deposit products with higher rates, they added.

But investors need to pay attention to other factors affecting rates on US dollar deposits, such as exchange rate risks and foreign exchange conversion costs, said Wang Pengbo, chief analyst at Botong Consulting. Moreover, they should carefully assess their liquidity needs, risk tolerance, and overall financial goals before committing to such deposits, he added.

Editors: Tang Shihua, Futura Costaglione