China’s onshore and offshore exchange rates have converged to parity, less than one week after the gap between them hit an all-time high as investors bet on currency depreciation in the offshore market.

The two rates converged – the first time since October 29 – just minutes after the renminbi-based overnight Hong Kong interbank offer rate, or CNH-Hibor, sky-rocketed to 66.8 per cent. On Monday the rate had risen 939 basis points to a then-record high 13.4 per cent.

The soaring rate reinforces just how tight liquidity is for the offshore renminbi, after China opened a new front in its war to curb currency depreciation by buying up renminbi offshore, foiling the burgeoning carry trade and driving the cost of borrowing to a record high. The spike likely reflects a massive short-squeeze.