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Hong Kong money market rates jump to near 9-year highs

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Hong Kong's money market rates rose to multi-year highs on Monday as demand for Hong Kong dollars remained strong after the central bank's efforts to soak up excess cash and thanks to the city's hot stock market.

[HONG KONG] Hong Kong's money market rates rose to multi-year highs on Monday as demand for Hong Kong dollars remained strong after the central bank's efforts to soak up excess cash and thanks to the city's hot stock market.

Three-month interbank rates in Hong Kong climbed to 1.06 per cent, their highest level in nearly nine years. It was 0.995 per cent on Friday.

Analysts say the market's expectation of Hong Kong dollar rates has changed since the Hong Kong Monetary Authority (HKMA) issued Exchange Fund Bills in August to stabilise its depreciating currency.

"The additional issuance of Exchange Fund Bills showed that the HKMA took an active approach toward the Hong Kong dollar rates as it does not want to see currency rates passively pushed up by a Fed rate hike," said Raymond Yeung, Greater China chief economist at ANZ.

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The HKMA issued HK$80 billion (S$113 billion) worth of Exchange Fund Bills (EFBs) since early August, helping push up HIBOR. When it announced the issuance of the bills, the HKMA said the issuance had nothing to do with the Hong Kong dollar's weakening since the beginning of this year.

In addition, the increased initial public offerings (IPO) recently and strong stock market performance in Hong Kong also triggered demand for the currency.

The main Hang Seng index ended above 30,000 points for the first time in 10 years on Nov 22, amid signs Chinese investors are stepping up buying of Hong Kong stocks.

REUTERS

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