Interbank lending rates rose to record highs yesterday as banks followed the Hong Kong Monetary Authority's call to increase costs of borrowing for potential speculators on the local currency.
The overnight rate at one point shot up to a peak for the day of 20 per cent, although no transactions were made at this rate.
It hovered at about 10 per cent for most of the day before closing at 6 per cent, when banks released their surplus liquidity on to the market.
The one-week to one-month money rates were boosted to 12 per cent, the two-month to three-month at 10 per cent while six-month to one-year money rates stayed at 9 per cent.
The Bank of East Asia's Hong Kong dollar spot market head, Carlos Cheung, described yesterday's market as having 'virtually vanished'.
'In this abnormal market situation where interbank rates are higher than the prime rate, most banks would choose to do nothing unless very necessary in an attempt to protect their interests,' he said.
