The lending comes amid a climb in borrowing costs in the city, where one-month Hong Kong interbank offered rates have climbed to the highest in around two months. Demand for local assets amid a Chinese stock surge has contributed to the increase in Hibor, as supply of the Hong Kong dollar tightened.
“The more often usage of discount window mirrored tighter Hong Kong dollar liquidity conditions, together with soaring HK equities settlement demand, increasing margin financing activities, ongoing silver bond subscriptions as well as low aggregate balance,” said Ken Cheung, chief Asia FX strategist at Mizuho Bank.
The tighter liquidity has narrowed the gap between US and Hong Kong borrowing costs, bolstering the local dollar, he added.
The Hong Kong dollar was little changed just below 7.77 per US dollar on Tuesday, after touching its strongest since 2021 earlier this month. Pegged to the US dollar since 1983, the Hong Kong dollar is allowed to trade in a band of 7.75 to 7.85 against the greenback.
