Hong Kong Overnight Funding Costs Surge to Highest Since 2007
- Liquidity continues to tighten after repeated FX intervention
- Higher rates leading to a strengthening of local dollar
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The cost to borrow overnight in Hong Kong jumped to a 16-year high as official efforts to enforce the city’s currency peg with the US dollar cascaded through funding markets.
The overnight Hong Kong interbank offered rate, known as Hibor, climbed 37 basis points to 4.81%, the highest since 2007, on Thursday. While the rise offers support to the local dollar, the size of the move is a likely side effect of the amount of cash the Hong Kong Monetary Authority has drained from the system to push borrowing costs higher.