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Spot Gets Close To Mid Point Of Peg Band, Option Activity Higher This Week

HKD

Spot USD/HKD has been somewhat immune to the broader USD recover in recent sessions. We sit near 7.8080 in recent dealings, albeit up from earlier lows (7.8032). This was fresh lows in the pair back to early August. We got to 7.7926 then, a brief dip below the mid-point of the HKMA's peg band.

  • HKD gains are in line with waning US-HK yield differentials. The 3 month spread back to +5bps, also lows from early August. 3 month Hibor set at 5.35% today, fresh highs back to August. This is working against some of the support for the USD from Powell's rhetoric on Thursday.
  • A break below 0bps in this spread could herald a deeper move lower in USD/HKD. In the risk reversal space, we remain around recent highs, last near -0.35.
  • Interestingly, HKD FX option activity has been more prominent this past week. We spiked to 4.45bn on Wednesday per DTCC data compiled by BBG.
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