More turbulence seen

The money market yesterday experienced modest tightening in liquidity after the stock market's drop yesterday but activity in the forward market might be pointing to further turbulence, sources said.

The one-year Hong Kong dollar forward rate weakened to HK$8.15 against the US dollar from HK$8.03 on Wednesday, meaning that banks were preparing for another wave of abnormal movement in interbank rates. The overnight interbank lending rates closed at 5 per cent.

Longer term rates closed higher on forward-driven trading and amid fear of more market turbulence after the fall in the Thai baht to a record low close of 39.65 to the US dollar and the Taiwan dollar's drop to a 10-year low of NT$30.99 to the US dollar before closing at $30.49.