The Once Dull Hong Kong Dollar Keeps On Thrilling: QuickTake

Pegged to the U.S. dollar since 1983, most of the time the Hong Kong dollar is the dullest currency around. But this past year or so has been different: First, it slumped to the weakest in more than a decade, prompting the central bank to buy Hong Kong dollars for the first time since 2015. But the decline continued and the currency closed at its lowest since 1984 in August. Then, in one dramatic trading session in September, the Hong Kong dollar surged the most in 15 years. What is going on, and why are homeowners in the world’s least affordable property market paying particular attention?

Primarily because the interest rates that matter did not increase in tandem with rising U.S. rates, making it more attractive for investors to sell local dollars and buy higher-yielding U.S. dollars. When the Hong Kong dollar fell to the lower end of its trading band in April, the Hong Kong Monetary Authority -- as it is mandated to -- began buying the local currency.