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USD/HKD Rebounds Back Above Band Mid-Point, Hibor Off Recent Highs

HKD

Spot USD/HKD has continued to climb, the pair last near 7.8100, just below session highs (7.8109). This puts us back above the 20-day EMA (near 7.8050), while the 50-day is near 7.8130. The pair hasn't been above the 20-day EMA since early Nov. Recent lows rest at 7.7861.

  • The move up in USD/HKD has coincided with a ticker higher in US-HK 3 month interest rate differential (last -23bps, versus recent wides of -32bps). Indeed, today was the first day the 1 month Hibor rate has fallen in 10 sessions (-14bps to 5.52%). The 3 month eased 12bps lower to 5.61%.
  • Still, USD/HKD started moving higher before the yield differential shifted back in favor of the USD.
  • Yesterday's Hong Kong equity weakness, where the HSI closed very close to YTD lows may have been a factor. Equity sentiment has stabilized somewhat today, although this hasn't aided HKD.
  • USD/CNH has also stabilized somewhat, which may have reduced downside impetus for USD/HKD.
  • The 1 month risk reversal has ticked higher, but at -0.33 remains largely within recent ranges.
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