Chinese money market rates are moving higher yet again in Shanghai trade today, as the upward climb of the official money market rate — SHIBOR — continues.
SHIBOR is the benchmark overnight interest rate used in lending activities between Chinese banks.
Whether it’s the overnight rate or rates further out the curve to one-year, they have been rising since the election victory of Donald Trump on November 9.
That’s driven the one-week rate to around 2.5% – the highest level since the PBOC caught the market by surprise and devalued the yuan in August 2015.
Naturally, some of the pressure being brought to bear on money market rates is likely related to the the recent yuan weakness. And there looks like there is a clear leading relationship between yuan weakness (USD/CNY rises) and one-week SHIBOR.
So with Reuters reporting Chinese state banks are in the market selling dollars and buying yuan to push USD/CNY lower, perhaps the push higher in Chinese rates is nearing its end.