Saturday, Jul 21, 2007
In Defence of Currency: A Case Study
YearBook.gov: 1997 Hong Kong Monetary Situation
Just so you know what's coming when our Chancellor is forced to defend the currency.....IR of 280%
As the banks collectively had sold more Hong Kong dollars to the HKMA
than they could settle by using their credit balances in their clearing
accounts with the HKMA, there was a shortage of interbank liquidity
when these foreign exchange transactions were settled on October 23. As
a result, short-term interest rates were driven up and the overnight
interbank interest rate briefly touched 280 per cent. The high interest rate
reversed the capital outflow and effectively fended off speculators.
Posted by lvmreader @ 03:53 PM (197 views) Add Comment
4 Comments
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1. Whiteknight said...
High overnight rate. Rest of the curve must have jacked up a bit aswell.
2. lvmreader said...
OK, so that was only the overnight rate and the yield curves for 1-yr, 2-yr, 3-yr, 5-yr, 7-yr, 10-yr etc may have not changed much, but don't think 25 basis point (bp) (0.25%) rises are the norm.
If they need tom the Treasury will pump up the volume in an awful hurry.
3. Whiteknight said...
Sure.
Besides those overnight rates would have played havoc with the banks positions and funding.
Also the sight of your overnight rate going to 250% is bound to cause interesting pyschological effetcs and immediate ripples (if not very large waves) everywhere else.
It all filters through and it wouldn't be pleasant.
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