Short-term interbank rates yesterday surged significantly after a big outflow of funds from Hong Kong dollars into US dollars. The move was triggered by a large commercial order from a local corporate. The outflow caused the aggregate clearing balance at the Liquidity Adjustment Facility - an emergency facility of overnight funds provided by the Hong Kong Monetary Authority to banks - to drop by a half to $7.3 billion from about $15 billion on Tuesday. The balance is one indicator of the supply of short-term liquidity in the local banking system. The overnight rate went up to 6.5 per cent from 4.5 per cent on Tuesday. The interest rates for short-term interbank borrowings of other maturities less than one month also shot up, albeit by a smaller amount. A spokesman said the authority believed the outflow was mainly due to 'sizeable genuine commercial order by a corporate' and had yet to detect any speculative activity against the local currency. He declined to name the corporate which initiated the order. However, traders said the order might have been executed on Monday and was due to be settled yesterday. Under the currency board system, the authority will absorb the Hong Kong dollars sold by banks for US dollars either by themselves or on clients' behalf. The selling once weakened the Hong Kong dollar spot exchange rate close to $7.75 per US dollar on Tuesday, but rebounded to $7.7475 at the local close yesterday. It strengthened to $7.745 per US dollar in late trade in London. Dao Heng Bank general manager Tam Ping-shing believed the higher short-term Hong Kong rates would invite banks to perform interest rate arbitrage activities, which would automatically restore the equilibrium. Commonwealth Bank of Australia treasurer Andrew Fung Hau-chung said the surge in overnight rates to about 5 to 6 per cent was easily absorbed by the market but may have reduced the possibility of a quick reduction in the prime rate. He said while stability in the local money market had improved the trading environment for domestic corporate debt, it had not yet created a situation capable of accommodating large new issues.