Has the Global Scare Over China Eased? Hong Kong Dollar Says Yes
- After a wild ride this year, pegged-currency is back to normal
- Libor once again exceeds Hibor as local lending rates fall
Hong Kong one-hundred dollar banknotes are arranged for a photograph in Hong Kong, China, on Wednesday, Jan. 20, 2016. Hong Kong dollar forwards sank to their weakest level this century, interbank loan rates jumped the most in seven years and the Hang Seng Index tumbled as China's market turmoil fueled speculation the city's 32-year-old currency peg will end.
Photographer: Justin Chin/BloombergRestricted to a tight trading band against the greenback, Hong Kong’s dollar may not be among the most-watched currencies in the world. But it can be a pretty good proxy for gauging investor concerns about China.
The currency earlier this year plunged to its weakest since 2007 as the yuan’s slide fueled speculation that Hong Kong’s monetary policy makers would have to abandon their dollar’s 32-year-old peg. The legal tender’s depreciation in the four weeks ending Jan. 22 was the sharpest such drop since 2003. And then it bounced back almost as fast, with Friday marking the end of its best four weeks since 2008.