Hong Kong Dollar Nears 7.85 Weak End as 1-Year Volatility Hits Lowest Since 2022
Updated
Updated · Bloomberg · Jun 25
Hong Kong Dollar Nears 7.85 Weak End as 1-Year Volatility Hits Lowest Since 2022
3 articles · Updated · Bloomberg · Jun 25
Summary
The Hong Kong dollar is drifting toward the weak side of its 7.75-7.85 trading band, with traders increasingly using it as a funding currency against the higher-yielding US dollar.
One-year dollar/Hong Kong dollar implied volatility has fallen to its lowest level since January 2022, lowering the risk of shorting the local currency and supporting carry trades.
Cheap borrowing costs in Hong Kong are reinforcing that strategy, making it easier to fund bets against the currency even as it remains inside the peg.
The move has also been helped by muted demand for US dollars in the city at the start of the Iran war, leaving markets calm rather than scrambling for greenbacks.