Hong Kong Dollar Faces Pressure to Drop as Fed Hike Nears
- Currency hovers near the lowest level in more than two years
- Hibor-Libor gap to exacerbate Hong Kong dollar weakness
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The Hong Kong dollar is coming under pressure to fall further as its interest-rate gap with the U.S. widens ahead of an expected Federal Reserve rate hike and as the city endures its worst Covid outbreak.
The currency fell to the lowest in more than two years on Friday. Now the gap between the three-month interbank rate on the Hong Kong dollar, known as Hibor, and U.S. dollar funding cost has widened to the most since 2019. That’s likely to spur further Hong Kong dollar depreciation as traders borrow the currency more cheaply in the interbank market and sell it versus the higher-yielding greenback.