USD/HKD Close To Recent Highs, HKMA Has No Intention Of Chaning Peg System

Spot USD/HKD tracks near 7.8240 in recent dealings. This is close to unchanged for the session. Earlier lows in the week sub 7.8200 were support. Back to late September, the 7.8150/60 region has seen dollar support emerge. On the topside, offers have emerged on moves above 7.8250, so not too far from current spot levels.

• These shifts in USD/HKD broadly match short rate US-HK interest rate differentials. The 3 month spread was last at +20bps, above late September lows, but not showing a strong trend in October to date.
• 1 month Hibor was fixed today at 4.96%, comfortably off recent highs. The 3 month remains more elevated relative to recent history, last at 5.275%.
• The 1 month risk reversal is a touch above recent lows, last near -0.39. On the data front, tomorrow delivers September unemployment, then on Friday its September CPI.
• HKMA Chief Eddie Yue reiterated yesterday that Hong Kong has no intention to change the HKD peg system (see this link). This coincided with the 40yr year anniversary of the peg system.