USD/HKD: Heading higher, no apparent pressure on the currency peg - ANZ

USD/HKD spot has breached the 7.80 level for the first time since January 2016, however, unlike previously, longer dated USD/HKD forwards have stayed close to the lower bound of the USD/HKD convertibility undertakings of 7.75-7.85, suggesting no apparent pressure on the currency peg, according to the analysts at ANZ.

Key Quotes

“A sharp widening in the USD-HKD interest rate differential has contributed to the HKD weakness. Also, demand for USD funding by Chinese banks may have also put upward pressure on USD/HKD.”

“Until the US-HK interest rate differential narrows, USD/HKD spot may remain supported even though the pair typically peaks off in the 7.80 area. Also, this time round, we need to monitor the funding dynamics of Chinese banks.”