Hong Kong's liquidity continues to tighten, and the cost of lending overnight has risen to a new high in 16 years.
According to Bloomberg, the interest rate of the Bank of Hong Kong overnight (Hibor) rose 37 basis points on Thursday (May 11) to 4.81%, the highest level since 2007.
The Hong Kong Financial Authority has been drawing liquidity from the banking system to boost Hong Kong dollars.The differences between Hibor and the US comparability interest rates have made low interest borrowing in Hong Kong dollars and buying higher dollars in the US dollar to become a welcoming transaction of hedge funds.This pushed the Hong Kong dollar to the level of exchange guarantee, forcing the official to spend 6.5 billion US dollars (about S $ 8.6 billion) to defend the interval since February.
Bloomberg reports that as some companies will pay dividends in the summer, the rise in demand for Hong Kong dollars will also help push Hibor.
The rise of Hibor has prompted local banks in Hong Kong to increase the main loan interest rate on customers.Earlier this month, Hong Kong's largest bank HSBC Holdings increased Hong Kong dollar's preferential interest rate to 5.75%per year.Standard Chartered Bank and Bank of China (Hong Kong) also announced that they will raise the best preferential interest rates.
