USD/HKD is kept in a 7.75-7.85 ‘band’ by the Hong Kong Monetary Authority (HKMA).
- HK’s de facto central bank has been intervening to keep USD/HKD above 7.75 in past weeks and did so again overnight.
- HK has higher interest rates than the US right now, so the positive carry is tempting HKD longs
You’ll have seen the headlines that the US is considering undermining the per:
China has PLENTY of bullets in the magazine right now though:
MUFG tip cold water on any change coming from the HKAM:
- There is no signs for the HKMA to change the policy to link HKD to USD. Even though if there is unthinkable situation happened in future, it will make more sense for HKD reaching to the upper band, i.e. above 7.8505, instead of lower band.