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Spot USD/HKD Close To Multi Month Highs, Authorities Aim To Boost Equity Market Liquidity

HKD

Spot USD/HKD sits a touch below recent highs, last tracking at 7.8440. Moves above 7.8450 weren't sustained on Friday, but the pair remains near multi-month highs, with the top end of the peg band at 7.8500 within sight.

  • US-HK short term yield differentials continue to trend higher, last above +100bps, with HK's 3 month HIBOR dipping ~40bbps last week to 4.60%. A firm yield backdrop at the US front yield is also helping USD sentiment.
  • In terms of outright forwards, we are seeing a slightly more supportive USD back. The 12 month is back near 7.7800, the 6-month ~7.8035, the 3 month near 7.8185.
  • The 1 month risks reversal for USD/HKD remains contained though, last near -0.30.
  • The local data calendar is quiet until Thursday when July retail sales print.
  • The authorities will aim to boost stock market liquidity, following a weekend announcement (see this link for more details). Boosting Hong Kong's competitiveness as an international finance center is also an aim.

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