Central banks worldwide rallied to defend financial systems yesterday, pumping cash into markets to shore up confidence in the global payments system. In Hong Kong, the money markets were evidently reassured by the co-ordinated response, and a brief spike in call rates - to as high as 5 per cent from 3.25 per cent at the close on Tuesday - was quickly reversed. By the close yesterday, with global liquidity support serving to calm frayed nerves, local rates were back down at 3.5 per cent. Benchmark three-month interbank rates were up just 12 basis points at 3.38 per cent - well within a typical day's trading range. Volumes in both fixed-interest and foreign exchange trading were low, traders reported, in a sign that the co-ordinated central bank campaign had succeeded in maintaining confidence after the devastation caused in the New York terror strike. Joining that campaign, the Hong Kong Monetary Authority yesterday said its discount window through which banks could tap money would remain open, and adding that it stood by to deal with any exceptional problems banks might face. 'It is not, therefore, envisaged that there will be any problems with clearing and settlement in Hong Kong - in either Hong Kong dollars or US dollars,' the HKMA said. 'Nevertheless, the HKMA will monitor the situation closely, with a view to ensuring adequate liquidity and smooth functioning of the systems.' Analysts said the Bank of Japan had injected two trillion yen (about HK$127.89 billion) of liquidity into the Japanese market. Similar cash injections were made by the German and Swiss central banks. 'In the foreign exchange market, we had a very quiet day,' said Pierre Goad of HSBC. 'We estimate trading volume was about 50 per cent of a typical September day.' The US dollar weakened to 118.5 yen in early trade from 121 yen previously. But by the close, it was trading back above 119 yen, and was at 119.45 yen in late European trade. 'On our side, HSBC was committed to providing liquidity to customers in all the financial instruments we trade but volumes were slim and customer inquiries light,' Mr Goad said. 'It is fair to say that most market participants have not been trading actively at all.' Longer-term consequences for financial markets of the terror strike in New York were spelled out in a Barclays Capital research note to clients. 'Some companies will face significant and adverse credit trends following the collapse of the World Trade Centre,' it said. 'Insurance companies will face obvious liabilities but strains could also be felt by those companies reliant on short-term funding or in need of raising capital over the short term.' Weakness being seen in global risk markets would expose heavily indebted companies - notably European telecommunications firms - to additional funding concerns, and hit the balance sheets of holders of the debt, Barclays said. Echoing widespread expectations in the market, however, Barclays said the more severe downside risks to the global economy and financial system could be moderated by effective policy responses, which would include further cuts to US interest rates. Financial markets are now divided over whether the US Federal Reserve will immediately cut rates as much as 50 basis points, or will hold off until the next Federal Open Market Committee meeting and cut rates a more modest 25 basis points.