The swift reversal in Hibor is helping to support the Hong Kong dollar as the extra volatility has increased the uncertainty of trades betting against the currency. That’s offering a respite to the authorities who have fought in recent months to defend the currency’s peg to the US dollar.
Hong Kong’s short-term funding costs have come off their highs this week, with analysts saying local interest rates look to be peaking after they spiked higher last month.
The overnight Hong Kong interbank offered rate, the shortest tenor of so-called Hibor, has tumbled 158 basis points for this week through Thursday, heading for the steepest weekly decline since May. The gauge had climbed to this highest level this year on Monday.
