Hong Kong Faces Long Slog of Cash Withdrawal to Aid Currency

(Bloomberg) — A measure of Hong Kong’s interbank liquidity may need to drop further to help the local currency recover, even though the gauge has already slumped nearly 60% since May.

The one-month Hong Kong interbank offered rate, or Hibor, has risen to a succession of two-year highs since June as the Hong Kong Monetary Authority has drained cash from the financial system. Still, one-month Hibor lags behind its six-month peer by about 150 basis points. While a gap is normal, given expectations for rising interest rates, the spread between the two is near the widest since October 1998.