* CNH overnight borrowing rate fixed at 5.5155 pct
* That rate hits 10 pct, then eases to about 2 pct
* Volatile CNH Hibor partly due to PBOC actions - traders
(Adds comments, details)
By Michelle Chen
HONG KONG, Sept 12 Hong Kong's overnight yuan
borrowing rate eased to around 2 percent after hitting 10
percent on Monday morning amid volatile trading following its
fixing at a seven-month high.
The CNH Hong Kong Interbank Offered Rate benchmark (CNH
Hibor), set by the city's Treasury Markets
Association (TMA), was fixed at 5.5155 percent for overnight
contracts, the highest level since Feb. 19. Friday's fixing was
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 surging CNH Hibor is just a natural result of the
central bank's intervention last year," a senior Hong Kong
The People's Bank of China "has brought yuan funds back to
onshore market after their forward positions here matured," said
the trader, adding that he did not see any intervention in the
CNH market recently.
"The offshore yuan market actually does not lack liquidity,
but the central bank's action has a big psychological impact on
it," the trader said.
RESIDUAL FROM 2015
Sue Trinh, head of Asia FX strategy at Royal Bank of Canada
in Hong Kong, agreed.
"It's pretty much the residual left over from the
intervention that we saw last year that was unsterilized," Trinh
said, noting that liquidity was tight now just for short-term
contracts such as overnight ones.
In August 2015, the PBOC orchestrated a significant
depreciation of its currency, followed by a series of
interventions both onshore and offshore to stabilise market
The overnight yuan borrowing rate fell to around 2 percent
at 0835GMT Monday.
However, traders say the CNH Hibor may remain volatile in
the coming days as market players need time to digest the
actions from the central bank and reallocate their yuan funds.
"The offshore yuan market is definitely not in panic or lack
liquidity like what happened last year or at the beginning of
this year," said a senior banker at a Chinese bank in Hong Kong,
adding that a range of rumours impacted the market.
(Additional reporting by John Ruwith in Shanghai; Editing by