The Hong Kong central bank has increased the one-month Hong Kong Interbank Offered Rate (Hibor) to 0.88% from last month’s figure of 0.19%.

The rise followed the Hong Kong Monetary Authority (HKMA) aggressively purchasing the local currency to ensure it doesn’t surpass the weaker end of the 7.75-to-7.85 per Dollar range.

“We may see more upside for the Hibor in September and December amid quarter-end and year-end demand,” should the interbank liquidity pool continue to fall on intervention, according to DBS Bank global market strategist, Carie Li.

Interventions by the HKMA have lowered the city’s aggregate balance by almost 30% in under a fortnight to HK$233.3 billion. This week the Hibor increased to a two-year high, but remains under the U.S. equivalent by over 70 basis points, Bloomberg reports.

An ongoing rise in the Hibor could become another economic risk for Hong Kong. The government recently lowered its growth forecast to between 1% and 2% for this year. However, in contrast, Goldman Sachs Group predicts growth of 0.3%.

In addition, as well as DBS Bank forecasting more increases in the Hibor, Bank of America expects the rate to hit 1.8% by the end of September, and 2.5% by the end of the year, the Bloomberg report adds. BoA Strategist Chun Him Cheung believes the rate will hit 4.25% by the end of Q2 2023.

“Risks are skewed toward an even faster HKMA draining cycle given the large steps the Fed is currently taking,” Cheung stated. “Due to this uneven risk profile, we continue to like being exposed to the upside in Hong Kong Dollar rates.”

So far in June, the three-month Hibor has risen 78 basis points to 1.68%, on track for its largest monthly increase since 2008.