You are currently viewing Hong Kong's FX Move Spurs “Asymmetric” Rate Bet

Hong Kong's FX Move Spurs “Asymmetric” Rate Bet

By Ye Xie, Bloomberg Markets Live commentator and reporter

This week has been dominated by the turmoil in the cryptocurrency world where Tether, the top stablecoin, is struggling to defend its peg to the dollar. In contrast, in the traditional-finance world, Hong Kong’s first currency intervention in three years seems rather more mundane.

As the peg-defending mechanism kicks in, Hong Kong’s borrowing costs rise to catch up with those in the US. Bank of America’s strategists see betting on a widening rate differential between the two as one way to profit from the Hong Kong Monetary Authority’s operation.

While Hong Kong’s move to defend the weaker end of its 7.75-7.85-per-dollar peg Wednesday – the first such move since 2019 – sounds like a big deal, it’s not. It’s how a currency peg is supposed to work. When the local dollar falls to the weaker end of the trading band, the HKMA steps in as the buyer

..... (Read more by following the post link below)

This post was originally published on this site