Hong Kong banks began lowering yuan interest rates yesterday, after liquidity rose on the back of new measures introduced by the Hong Kong Monetary Authority (HKMA), the de facto central bank.
The HKMA launched a yuan liquidity facility yesterday to offer one-week yuan loans to local banks in exchange for collateral, such as government bonds.
The facility is regarded as a last resort for those seeking yuan funding in times of stress or market shocks.
The regulator also introduced a new liquidity-ratio requirement, which allows banks to classify more of their yuan assets as liquid.
The measures, which are aimed at boosting funding, are part of an effort to entrench Hong Kong's status as the leading international yuan trading centre.
Interest in investing in the currency has weakened in recent months due to a slowdown in appreciation.