CONFIDENTIAL
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9.
Bouts of speculative pressure widened the differential
between US dollar and Hong Kong dollar interest rates at the
beginning as well as at the end of the year. In mid-December, the
differentials in the one-month and three-month rates were about
eight and seven percentage points respectively in favour of US
rates, compared with differentials of around one percentage point
during most of the year. At the end of the year, the differentials
fell slightly to seven and six percentage points respectively.
10.
Deposit rates administered by the Hong Kong Association
of Banks were adjusted on ten occasions during 1987, comprising a
downward adjustment in January, followed by five upward adjustments
between March and mid-October and four downward adjustments
thereafter. At the end of the year, the savings deposit rate was
1 1/2% and the three month deposit rate was 2%. The best lending
rate stood at 5 1/2%.
11.
In a move to discourage speculation on the revaluation of
the Hong Kong dollar, the Hong Kong Association of Banks, after
consulting the Financial Secretary, made new rules on 19 December
which permit, under exceptional circumstances, the charging of
interest on large balances maintained by banks on their clearing
accounts. These new rules amount to the charging of negative
interest rates and are intended to combat speculation before its disruptive effects spread to affect the economy at large.
CONFIDENTIAL