A Hong Kong Dollar Drop to Weak End of Band May Be Short-Lived

WhatsApp Channel Join Now

Telegram Group Join Now

(Bloomberg) – The hong kong dollar is expected to spend a short of time under pressure pressure than recent bouts of weight of weight, thanks to forecasts for a softer greenback and buster.

The City’s Currency is Slipping Ever Closer to the Weak End of its Fixed Trading Range, as low borrowing costs encourage carry trades where trades where investors borrow it to buy Interest-Rate differentice.

A breach of the 7.85 per greenback threshold would prompt the hong kong kong monetary authority to sell us dollars to protect its currency peg. However, a sustained intervention may not be required as the impact of President Donald Trump’s Trade and Fiscal Policies Weigh on the Greenback.

Equity Inflows from Mainland China and Seasonal Demand for Hong Kong Kong Dollars for Corporate Dividend Payments will also also buy the currency and reduce the pressure the pressure on authorities to act, accessing to car Global Market Strategist at DBS Bank Ltd.

“The us dollar is weaker and the federal reserve is on the way to cut rates, this time the carry trade will not be so active,” Li said. “The hong kong dollar may not stay at 7.85 for as long as it did in 2022-2023.”

The Hong Kong Dollar Hovered Around The Weak End of its 7.75-7.85 band for a period of about Seven Months from May 2022, Touching the Edge in Several Trading Sessions. The following year it did the same from February to may as us rate hikes widened the us -Hong kong yield gap and made it similar to appealing to buy the greenback.

The trigger for the recent bout of weight of weakness in the city’s currency was ironaciously its strength amid an extra Month. But the Flood of Liquidity also dragged down borrowing costs, pushing the currency from one end of the band to the other at the fastest pace in for decades.

The Local Dollar May Soon Touch the edge of the range but expectations for us currency weakness will keep it valati, according to steephen chiu, chiff asia fx and rates strategist at bloomberg intellect at bloomberg.

“Carry trades will eventually lift the hong kong dollar to 7.85 likely before the end of June,” He said. “The new norm will be for the hong kong dollar to swing more frequently within 7.75 to 7.85 trading range.”

Wall street banks are reinforcing their calls that us currency will weaken further, thanks to a combination of interest-also cuts, Slowing Economic Growth and TRUMP’s TRADE and TAX POLICIES. A bloomberg gauge of the greenback is trading Around its weakest since 2023.

The scale of the HKMA’s intervention and its reluctance to mop up the excess cash it pumped into the market, sugges to some it is its priority is to help revive the City’s Borrowing COTY’S ECONOMIS ECONOMY by. If it wanted to push back on the bearish bets against the local dollar it could push borrowing costs higher against bills.

“If hong kong interbank offered rates stay low for longer and banks are able to pass the lower funding cost to the real economy, it can help the Hong Kong Economy by Stimulating Demand and Financing Activities,” NG, Senior Economist at Natixis in Hong Kong. “For now, the hkma seems happy with low interest rates.”