(1888PressRelease) May 16, 2019 - It’s all about Hong Kong this week. The city’s currency is keeping FX traders busy, especially in the morning, when the de facto central bank has been intervening to protect the local dollar.
The currency got some reprieve from a dovish Federal Reserve and is now trading near its strongest level in six weeks. The Fed’s signal that it will keep rates on hold this year surprised analysts and alleviated pressure on Hong Kong authorities. Notes William Lui of IDS Associates
Pegged to the U.S. dollar since 1983, Hong Kong’s currency has hit the weak end of its trading level repeatedly this month, local one-month borrowing costs climbed for a 12th straight day to the highest since in 4 months. That’s helped narrow the gap between Hong Kong and U.S. borrowing costs.
Lui adds, “To be fair, Hong Kong has had a little help in growing to its present size. The Stock Connect program links the territory’s exchange to those of Shanghai and Shenzhen on the Chinese mainland, creating a two-way financial corridor through which Chinese and international investors can deal in securities in all three markets.”
Hong Kong’s rise as a financial center is of a piece with China’s entry into the world’s financial mainstream. Its currency was allowed in 2016 to join the IMF’s elite basket of reserve currencies, alongside the dollar, the euro, sterling and the yen.
“This is all due to the Peg, best thing to ever happen to the Island and it’s financial security,” According to Lui.
IDS ASSOCIATE LIMITED
We founded IDS Associates Limited in 2008 by combining the professional approach of management consulting with the domain knowledge of Financial Services. We are a consulting boutique focused on the Financial Services industry and we work with our customers throughout Asia and Europe to effectively ensure the identification, design and implementation of customised solutions that enable them to deal adequately and promptly with the challenges of the market they operate.
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