USDHKD Moves Further Off Limit

USDHKD eased to 7.8430 at the moment. The dollar stress in the exchange rate may be over, but if so, the stress will migrate to a new target.

SCMP: Higher interest rates after HKMA intervention stoke property and stock worries
For the past three years, even as the HKMA increased its base rate six times in lock step with the US Federal Reserve, local commercial banks have managed to keep lending rates low, thanks to the abundant inflows into the city’s assets.

So much so that some market watchers are worried about the potential impact of higher borrowing costs on the city’s red hot property and equity markets.

The HKMA has used HK$51 billion (US$6.5 billion) of its US$440 billion in foreign reserves over the past week to purchase the local currency, mopping up cash from the banking system, which could finally compel commercial banks to raise rates to be in sync with their US counterparts.

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