China has opened a new front in its war to curb currency depreciation by buying up renminbi offshore, foiling the burgeoning carry trade and driving the cost of borrowing to a record high.
The elevated overnight CNH Hong Kong Interbank Offer Rate (Hibor) shows how volatility in China’s currency — once a highly domestic side-show for global investors — is fanning across the globe through renminbi internationalisation. Hong Kong, the biggest offshore market, bears the brunt.
It is also a potent sign of the lengths to which China's central bank is prepared to go to support the value of offshore renminbi, known as CNH.
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