Hong Kong's currency strengthens in turbulent times
The Hong Kong dollar is poised to break through the top thin 7.75-7.85 range against the US dollar and is currently considered one of the best-performing monetary standards of 2020 despite the city-state's economic struggle to mitigate the aftermath of the global pandemic.
The Hong Kong Monetary Authority (HKMA) burned through HK$7.7 billion (US$993.5 million) a week ago in an effort to stem the economic fallout as the city-state’s currency climbed to its maximum value for the first time in over four years.
Financial specialists believe that China pursuing cheap Hong Kong listed offers, as well as the higher yield margins and the government stimulus strategies have all culminated to drive up the Hong Kong dollar's value.
Forex traders regularly acquire loans in a currency that generally has a smaller interest rate in order to finance buys in markets with a higher yield. For example, the Hong Kong dollar is currently one such case, and the inflows reinforce the demand for the currency.
As a major aspect of the peg strategy, Hong Kong's official "base rate" follows the regulatory lead of the US Central bank. In any case, when the Fed's primary rate loses its 50 basis-point lead over the 5-day average of lending costs between Hong Kong's banks, as it did last month, the HKMA's approach follows the local interbank rate.
Hong Kong banks are currently lending to one another at rates higher than their US counterparts by the highest margin since of the century. They are likewise more inclined to spiking when there is less money available.
Hong Kong's financial exchange is one biggest markets in the region. IPO’s such as, the heavily backed recent listing of Akeso, have bolted up money and kept interest rates raised, said Carie Li, financial specialist at OCBC Wing Hang Bank.
China’s investors pumped plenty of money into Hong Kong stocks, a significant number of which exchange lower than peers on the Chinese mainland and "Southbound" net buys through the Stock Connect link which reached a record US$17.93 billion last month.