In what appears to be yet another effort to spook shorts out of speculative positions in offshore Yuan, China appears to have tamped down its liquidity spigot driving overnight HIBOR rates up a shocking 194bps to 3.53% – the highest in over a month. The spread between offshore and onshore yuan has collapsed, even as the Yuan plunges to to its weakest against the dollar since September 2009.
As Yuan hits its post-leg record lows, it seems each streak of selling is met with a kneejerk liquidity plunge in money markets…
Which has spooked the specs out of the arb between onshore and offshore Yuan…again
Of course, while 3.53% is notable for overnight money and a big shock, there is plenty of room to go if the capital flight and speculation continues – ON/HIBOR neared 25% in September as turmoil re-appeared.
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