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USD/HKD Close To Mid October Lows

HKD

Spot USD/HKD sits near 7.8175 in latest dealings. This is back close to mid-October lows near 7.8160. A break sub this level could see 7.8100 targeted, while early August lows in the pair rest back at 7.7926.

  • HKD strength is in line with lower US-HK yield differentials, although at the 3 month tenor, the shift lower has been modest. We were last at +15bps, still not sub late Sep lows in the differential.
  • 1 month Hibor has ticked up but remains below recent highs (last 4.9%), while the 3 month is drifting higher, last fixed at 5.27%. The 1 month risk reversal has ticked higher, but remains within recent ranges, last -0.36.
  • Modestly more positive equity sentiment for China and Hong Kong, with gains in property stocks evident post a meeting between developers and regulators is likely helping HKD at the margins. The same factors have also aided CNH.
  • The HKMA reiterated its well worn line yesterday that it has no plans to change the USD/HKD peg.
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