(Bloomberg) -- Hong Kong banks borrowed the largest amount of short-term cash in almost five years from authorities, a move pointing to a sudden demand for liquidity.

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The Hong Kong Monetary Authority — the city’s de-facto central bank — loaned out HK$4.79 billion ($617 million) through its discount window on Monday, the most since December 2019, according to data compiled by Bloomberg. Lenders have tapped the facility six times in about a month, with the next largest amount HK$3.3 billion.

The lending comes amid a climb in borrowing costs in the city, where one-month Hong Kong interbank offered rates have climbed to the highest in around two months. Demand for local assets amid a Chinese stock surge has contributed to the increase in Hibor, as supply of the Hong Kong dollar tightened.

Everyone Wants Hong Kong Dollar as Stock Rally Boosts Demand

“The more often usage of discount window mirrored tighter Hong Kong dollar liquidity conditions, together with soaring HK equities settlement demand, increasing margin financing activities, ongoing silver bond subscriptions as well as low aggregate balance,” said Ken Cheung, chief Asia FX strategist at Mizuho Bank.

The tighter liquidity has narrowed the gap between US and Hong Kong borrowing costs, bolstering the local dollar, he added.

The Hong Kong dollar was little changed just below 7.77 per dollar on Tuesday, after touching its strongest since 2021 earlier this month. Pegged to the U.S. dollar since 1983, the Hong Kong dollar is allowed to trade in a band of 7.75 to 7.85 against the greenback.

(Updated with Mizuho comment)

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