Just hours before China's central bank lifted its key lending and deposit rates for the first time in almost a decade yesterday, the Hong Kong Monetary Authority sold Hong Kong dollars into the money market to keep the local currency from strengthening too rapidly.
By early evening, Asian currencies were tumbling against the greenback, sending analysts scrambling to assess the impact of the rate hike on industries, stock and currency markets, and the global economy.
Most assumed the 0.27 percentage point rise in one-year lending and deposit rates, to 5.58 per cent and 2.25 per cent respectively, would cool China's torrid economy and curb demand for energy and raw materials such as steel, coal and alumina.
'If spending on construction and manufacturing - which requires metal and other resources - slows, that's got to be negative for commodities,' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia.
Rising borrowing costs may also quell demand for car loans, forcing manufacturers to scale down production in an industry already showing signs of fatigue after years of breakneck growth.
China imported a record 151 million tonnes of iron ore in the first nine months of this year, the China Iron and Steel Association said, as steelmakers added capacity to feed the country's construction and carmaking boom.
