HKMA interventions may help open new USD/HKD carry trades
Repeated defences of peg should keep HK dollar weak; it could be used to buy assets in currencies other than US dollar
Hong Kong’s de facto central bank has stepped in three times this month to protect its currency’s peg with the greenback, after it repeatedly bumped the bottom of its restricted trading range.
But the Hong Kong Monetary Authority’s (HKMA) dedication to defending its dollar looks likely to encourage traders to open new USD/HKD carry trade positions, seen as the main culprit behind the drop that prompted the interventions in the first place.
This carry trade – borrowing low-yielding HK dollars
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