Hibor surges to 7-month high ahead of Mid-Autumn Festival
Some traders suggest PBOC targeting yuan shorts, while others say jump shows a lack of liquidity, as banks work to keep yuan reserves at safe levels
The borrowing cost of offshore yuan in Hong Kong’s interbank market surged sharply again on Wednesday, reaching the highest level in seven months ahead of the Mid-Autumn Festival.
The overnight Hong Kong Interbank Offered Rate for offshore yuan, or CNH Hibor, rose 5.32 percentage points to 8.16167 per cent from Tuesday’s 2.838 per cent, according to Treasury Markets Association data.
It is highest level of offshore yuan Hibor since February 19, after it hit a seven-month high of 5.5155 per cent on Monday.
Various theories emerged among currency traders to explain the abnormal movement of CNH Hibor, according to Jasper Lo, chief executive of King International.
Some suggested the rise was a sign of The People’s Bank of China (PBOC), the central bank, intervening in the market to threaten short sellers against the yuan, with a US dollar on a rise amid increasing odds of an interest rate rise as stock markets continue to be weak.
A rise of Hibor increases the cost of borrowing the currency for short sellers, and dampens speculation activity.
“It’s possible that the PBOC wants to deter short-selling activities during the festival,” Lo said.
