New | Offshore yuan in liquidity crunch as PBOC reportedly cracks down on cross-border arbitrage
CNH interbank offered rates spiked this week after China’s central bank was reported to have halted cross-border interbank lending
Offshore yuan liquidity has been tightening this week after unconfirmed reports that mainland Chinese authorities implemented unconventional measures to crack down on cross border yuan arbitrage, which traders say is a highly unusual move given the currency is counting down to a key decision at the end of the month.
The Hong Kong interbank offered rates (Hibor) for offshore yuan, or CNH, have been ticking up from Monday. The overnight rate spiked to 4.9 per cent on Wednesday and fell marginally to 3.7 per cent on Friday, compared to just 1.5 per cent in the past few weeks.
Likewise, one-week and one-month CNH Hibor also advanced around 2 per cent this week.
The jump followed media reports, including Reuters and Bloomberg, that the People’s Bank of China had given verbal guidance to certain onshore banks to halt onshore lending to offshore banks, a key source of CNH liquidity in Hong Kong, as well as raising margin requirements on bond repurchases.
The PBOC has made no official statement on the reports.
