(Yicai Global) April 20 -- The three-month Hong Kong Inter Bank Offered Rate (Hibor) jumped to its highest level since December 2008 following purchases of more Hong Kong Dollars by the special administrative region’s de facto central bank to defend its peg to the greenback.
The three-month interbank rate rose from 1.32071% to 1.33661%, while the Hong Kong dollar reached 7.8482 against the US dollar, after the Hong Kong Monetary Authority (HKMA) made 13 currency purchases between April 12 and 19 totaling HKD51.3 billion.
Nevertheless, that Hong Kong’s currency battle is far from over, several analysts told Yicai Global. Currently, the three-month LIBOR is close to 2.33 percent, with significant spreads to HIBOR, indicating the currency remains under pressure.
“Supposedly, HKMA will continue its movement until a further hike in interest rate, so as to hold back those international short sellers of local currency,” said Zhou Hao, a senior economist at Commerzbank AG.
The Hong Kong dollar’s recovery is also a result of trading, he added. “As today is Thursday, spot exchange transactions adopt the T+2 settlement model. In other word, transactions made today will not be settled till the next Monday, and players have to pay the financing cost of three percentage points each day, so nine percentage points in total. Therefore short selling at this time only brings a maximum profit of around 10 percentage points, not a good deal for short-sellers, and it’s also one of the causes for the currency rise today,” Zhou said.
Editor: William Clegg