Borrowing rates for the Chinese currency in the offshore market in Hong Kong fell sharply on Tuesday after hitting seven-month highs in the previous session as markets limped back to normal after volatile trading.
The CNH Hong Kong Interbank Offered Rate benchmark , set by the city’s Treasury Markets Association, was fixed at 2.838 percent on Tuesday compared with 5.5155 percent on Monday, the highest level since February 19.
Offshore yuan borrowing rates have been elevated since late last week, and market players have different theories on why. Some say China’s central bank pushed the borrowing rates higher to dampen yuan short-sellers, and others believe it is just due to short-term liquidity concerns.
The overnight rate is a benchmark for other interest rates tied to the Chinese currency overseas.