January 4, 2017 / 3:24 AM / a year ago

Hong Kong's overnight yuan borrowing rate fixed at 16.95 pct

HONG KONG, Jan 4 (Reuters) - Hong Kong’s overnight yuan borrowing rate was fixed at 16.95 percent on Wednesday, hovering around more than three-month highs.

The CNH Hong Kong Interbank Offered Rate benchmark (CNH Hibor) is set by the city’s Treasury Markets Association (TMA). The overnight contract was fixed at 17.76 percent on Tuesday.

Offshore yuan liquidity has been tight in the past week mainly due to seasonal factors and holidays, market players say.

In addition, a shrinking yuan pool in Hong Kong also plays a big role as fewer people are seeking yuan-denominated assets amid expectations the currency will weaken further.

“The dwindling offshore yuan pool and controls on capital outflows have led to the elevated Hibor rates recently,” said Liao Qun, China chief economist at Citic Bank International in Hong Kong, referring to China’s tightening of regulations on outflows in recent weeks.

Yuan deposits in Hong Kong fell by 5.3 percent from a month earlier to 627.6 billion yuan ($90.23 billion) in November, the lowest level since January 2013. ($1 = 6.9553 Chinese yuan renminbi) (Reporting by Michelle Chen; Editing by Kim Coghill)

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