Hong Kong’s key interbank borrowing cost slumped following foreign-exchange intervention by the city’s authorities, fueling bearish bets against the local dollar.

The one-month Hong Kong interbank offered rate, or Hibor, extended its drop as it fell below 1 percent on Tuesday for the first time since 2022, according to data compiled by Bloomberg. The local dollar has fallen nearly 1 percent in May to head for its biggest monthly decline since 1983 when it was first pegged to the greenback.

The moves came after the Hong Kong Monetary Authority stepped in to cool the rally in the local currency by selling it heavily in early May. The operation boosted liquidity in the market, lowered borrowing costs and thereby eased the appreciation pressure on the currency.

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The ample liquidity conditions have spilled over to the derivatives market, and added to the bearish sentiment toward the local dollar.

Major tenors of forward points of the Hong Kong dollar, ranging from one-month to six-month, were all near their historic lows on Tuesday. That indicates the cost to short the local dollar is close to the lowest it’s ever been.

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“The deeply discounted Hong Kong dollar points are a big incentive for the return of long USD/HKD carry trades,” said Eddie Cheung, senior emerging markets strategist at Credit Agricole CIB in Hong Kong. “We expect long USD/HKD carry trades to remain in the driving seat supporting USD/HKD toward 7.85. Only then will we see an easing in Hibor conditions.”

The Hong Kong dollar was at 7.8248 per greenback on Tuesday, as it inched closer to the weak end of its 7.75 to 7.85 permitted trading range.