Hong Kong dollar and offshore yuan stronger while borrowing cost remains high

Both Hong Kong dollar and Chinese yuan rose on Monday morning while the interbank interest rate continued to rise.

Hong Kong dollar continued to bounce back on Monday morning to trade at 7.7903, edging up 0.11 per cent. It has been rising for three straight days since big buying orders pushed the currency back above the 7.80 level from the early hours of Thursday. The local currency once hit 7.8294 on Wednesday midnight, its lowest in eight and a half years.

The Kong dollar lost 0.01 per cent last week and is down 0.55 per in the first three trading weeks of the year on concerns of capital outflow, market slump and China’s economic slowdown. The borrowing cost in the interbank market remains high, however, with the 3-month Hong Kong interbank rate, or Hibor, remaining at a five-year high of 0.69, six-month Hibor at 0.95 per cent and 12-month Hibor at 1.33 per cent.

Offshore yuan bounced back on Monday to trade at 6.6077 to the US dollar, stronger by 0.04 per cent and putting an end to the losing streak of the four previous days. The currency rose 0.07 per cent last week.

Onshore yuan weakened by 0.01 per cent to 6.5784 on Monday morning. The currency rose 0.08 per cent last week.

The spread between onshore and offshore yuan has now narrowed to 293 basis points, down from the record 1,400 basis points on January 7.