The mortgage-related one-month Hong Kong Interbank Offered Rate declined 58 basis points to 3.08 percent on Wednesday, the most since 2008, after the city’s de facto central bank intervened in the currency market four times within five days.
The Hong Kong Monetary Authority has sold HK$129.4 billion worth of local currency against the greenback, as the exchange rate repeatedly tested the upper end of its 7.75-7.85 trading band against the greenback.
The interventions are also expected to drive up the HKMA’s aggregate balance, a measure of interbank liquidity, to HK$174.1 billion on Thursday.
Standard Chartered Hong Kong expects the Hibor to remain downward in the short run, widening the spread from the US rates.
StanChart HK expects growing demand for the Hong Kong dollar and noted that is mainly driven by upcoming initial public offerings and dividend payouts.
The bank projects the US Federal Reserve will cut interest rates by 25 basis points in June and again in the third quarter, while remaining unchanged in the meeting on Wednesday.
Meanwhile, HSBC Global Research projects Hong Kong currency rates to hover around 7.75 per US dollar in the short term, the strong side of the peg trading band.
The bank also sees greater downside than upside risk for the Hibor, as increased Hong Kong dollar liquidity is expected to be sufficient to meet upcoming liquidity needs.
STAFF REPORTER
