HK likely to raise banks’ interest rates

Bloomberg

Hong Kong’s attempt to force bank interest rates higher—seen by some as a bid to arrest losses in the local currency—has been given a big fat zero by the markets.
Plans to sap liquidity by boosting debt sales triggered an about-turn in the Hong Kong dollar on Wednesday, spurring speculation over the fate of one of the world’s surest currency bets. But less than a week on it’s as though nothing ever happened, with the local dollar reverting back to the depreciation mode it’s assumed for most of this year.
Hong Kong’s ample liquidity is a tough nut to crack, fueled as it is by inflows —particularly from mainland China—into the city’s Asia-leading equities. Meanwhile, local interbank rates continue to lag behind the US, where tightening is swelling the rate gap, exacerbating downward pressure on the pegged currency.
But the HKMA doesn’t give up easily. Four additional bill sales were announced in 2016 and there may be more to come this year if liquidity remains flush, says Societe Generale SA’s Jason Daw.