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HKD: USD/HKD Eyeing YTD Lows Amid Buoyant HK Asset Mood

HKD
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USD/HKD is back sub 7.7700, the pair last near 7.7660. This is close to late Sep lows of 7.7631. Late 2022 lows in the pair came close to 7.7600, while the bottom of the peg band rests at 7.7500, which we last traded around in 2020. The 20-day EMA is back at 7.7868 on the topside. 

  • Positive China related asset sentiment is benefiting HKD, with the very strong equity gains continuing today as Hong Kong markets return today. USD/CNH is down 0.30% but remains above 7.0000.
  • Hibor rates are tracking higher in Hong Kong, with liquidity potentially being withdrawn to chase the equity market rally. The US-HK 3 month rate differential is tracking sharply lower, from early September highs around +90bps, we were last near +21bps. Lows in this spread were at -33bps in Nov last year. The 12 month spread is stickier though, last around flat.
  • The 1 month risk reversal is close to recent highs, last near -0.30. 
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USD/HKD is back sub 7.7700, the pair last near 7.7660. This is close to late Sep lows of 7.7631. Late 2022 lows in the pair came close to 7.7600, while the bottom of the peg band rests at 7.7500, which we last traded around in 2020. The 20-day EMA is back at 7.7868 on the topside. 

  • Positive China related asset sentiment is benefiting HKD, with the very strong equity gains continuing today as Hong Kong markets return today. USD/CNH is down 0.30% but remains above 7.0000.
  • Hibor rates are tracking higher in Hong Kong, with liquidity potentially being withdrawn to chase the equity market rally. The US-HK 3 month rate differential is tracking sharply lower, from early September highs around +90bps, we were last near +21bps. Lows in this spread were at -33bps in Nov last year. The 12 month spread is stickier though, last around flat.
  • The 1 month risk reversal is close to recent highs, last near -0.30.