CHART: The overnight bank rate for China's offshore currency just exploded

Borrowing costs for Chinese yuan traded offshore leapt to record levels on Tuesday as suspected intervention from the PBOC to support the currency drained liquidity from the financial system.

The overnight Hong Kong Interbank Offered Rate (HIBOR) to borrow offshore yuan fixed at 66.8% on Tuesday, the highest level on record.

The chart below tells the story.

“The market suspects that the PBOC is possibly using major state banks to directly drain yuan liquidity in offshore markets,” a dealer at an European bank in Shanghai told Reuters.

The dealer described the strength of the central bank’s actions as being of “nuclear-weapon” level strength.

“Its actions are comparable to steps taken by other central banks when they previously fought against international speculators, such as George Soros,” he said.

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