- This is the script of CNBC's news report for China's CCTV on January 12, Tuesday.
Welcome to CNBC Business Daily, I'm Qian Chen.
The overnight CNH Hibor, a daily benchmark for offshore renminbi interbank lending, hit a record-high 13.4 per cent on Monday, up from 4 per cent on Friday and the highest level since the benchmark was launched in 2013.
That was not the end of the story.
On Tuesday, the index, which indicates cost of borrowing China's currency in Hong Kong's interbank market, jumped by 53 percentage points to 66.82 percent, more than FIVE times the previous record reached on Monday.
Comparable rates with tenors of up to a year all surged by records to unprecedented levels.
The funding squeeze makes short-selling the currency very expensive overseas, according to analysts.
As a result, the cost of borrowing offshore yuan in Hong Kong's interbank market surged as the amount of spare renminbi in the banking system declined.
On the other hand, data on the mainland's foreign reserves, released last week, showed the biggest annual drop on record in 2015, suggesting that the central bank has sold dollars to support the yuan.
Beijing's foreign exchange reserves had been reduced recently by some $500 billion, maintaining a comfortable $3.3 trillion in reserves.
RICHARD MARTIN, Executive Vice President of IMA Asia, says things are still in control.
[RICHARD MARTIN IMA Asia Executive Vice President] "Based on 3.3 trillion dollars of foreign exchange reserve, the RMB offshore market in Hong Kong is worth what, 130 billion, there is no contest. They can just move where they wanted.That's what they have done, so from now on, I think they'll force that off-shore rate to line up with the on-shore rate, and I actually dont think we are into a big devaluation here, I think the most we get this year is 3-5%. "
Meanwhile, Alex Wong from Ample Capital says the previously widening gap between the off-shore and on-shore RMB market was not just caused by shorting positions.
Demand of cash outflows played a major role as well.
[ALEX (t) WONG Ample Capital Director - Asset Management ] "I think there are not too much speculators shorting against RMB, actually it show that many RMB selling positions are acutally maybe caused by genuined fund outflow from China...this situation lasts. "
Another index to watch...the official CFETS RMB Index, which has dropped 1.5 per cent in the past month to 99.96 on January 8, according to a statement on its website.
[ROGER (t)BRIDGES Nikko Asset Management Global Rates & Currencies Strategist] "It tells that we were expecting the new trade-weighted index to get down to 100 from when they first brought it in. It actually got down to that, the big question now... are they gonna allow to go even furthur, so it is a part of control-devaluation. We are not expecting a 15% devaluation, but as the USD is expected to climb, we do expect that would just come away."
CNBC's Qian Chen, reporting from Singapore.