* HKD rates creep higher even as HKMA pours in cash
* Two-week forwards hit highest since June
* Fortcoming ANT Group IPO could drive liquidity squeeze
SINGAPORE, Oct 21 (Reuters) - The cost of borrowing Hong
Kong dollars rose on Wednesday and forward rates jumped as
traders anticipated a rush for cash ahead of what is expected to
be a record-breaking $35 billion dual listing by Ant Group.
The two-week Hong Kong Interbank Offered Rate
rose for a third straight session on Wednesday to a three-week
high of 0.36387%. It has gained 12.4 basis points this week.
China's Ant Group Co Ltd <IPO-ANTG.HK> has won approval from
the Hong Kong Stock Exchange to list, two sources told Reuters
this week, clearing the last regulatory hurdle for the
gargantuan initial public offering.
The fintech company plans to list simultaneously in Hong
Kong and on Shanghai's STAR Market in the coming weeks, sources
said, in what could be the world's largest IPO - spurring demand
for Hong Kong dollars in cash to buy the shares.
Flows into Hong Kong for such purchases and to take
advantage of comparatively high interest rates have prompted the
Hong Kong Monetary Authority to flood the market with Hong Kong
dollars to keep the currency from strengthening beyond its peg.
Yet two-week forwards, which touched their dearest
since early June on Wednesday, suggest traders still expect Hong
Kong dollar liquidity to tighten in the coming weeks as bankers
build out the Ant Group book.
"The Hong Kong dollar has been trading at the stronger end
of the band now since June, and the Ant IPO is really adding to
that pressure," said Steven Dooley, currency strategist at
Western Union Business Solutions in Melbourne.
The HKMA has sold HK$98 billion ($12.7 billion) into the
market in October so far to keep the currency below its upper
limit of 7.75 per dollar. Already this year it has sold more
Hong Kong dollars than in any full year since 2009.
($1 = 7.7500 Hong Kong dollars)
(Reporting by Tom Westbrook in Singapore and Alun John in Hong
Kong; Editing by Simon Cameron-Moore)