Foreign Exchange Market

Volatility prevents further rates cut

PUBLISHED : Saturday, 31 October, 1998, 12:00am
UPDATED : Saturday, 31 October, 1998, 12:00am

Continued volatility in interest rates in the interbank market has prevented the Hong Kong Association of Banks (HKAB) from cutting the savings rate further, said chairman Mervyn Davies.

Mr Davies said the recent increases in interest rates were nothing to worry about - they had just found their level and the currency board system had been working well.

'I think the message is that we continue to see a good trend in interest rates and a very stable market,' he said.

He said Asia was going through a period of relative stability which was why interest rates were trending downwards. This was good news for Hong Kong.

Mr Davies warned that it was too early for celebration as Hong Kong's position as a financial centre made it susceptible to global shocks, in particular the threat of a currency devaluation in Brazil.

The three-month benchmark interbank borrowing rate closed slightly lower yesterday at 6.75 per cent from 7 per cent on Thursday.

The HKAB last changed rates on October 16 when it cut the savings deposit rate by 25 basis points to 5 per cent.