Hong Kong Dollar Nears Strong End of Band as Peg Concerns Fade

  • Currency rebounds after plunging to eight-year low in January
  • Stabilizing yuan also boosting currency: Bank of Singapore

Hong Kong’s dollar headed toward the stronger end of its trading band against the U.S. currency on growing confidence in the future of the city’s 32-year-old peg and as the yuan stabilized.

The Hong Kong dollar is trading within 0.06 percent of the strong end of its trading band of HK$7.75-HK$7.85 against the greenback. The local dollar added 0.01 percent to HK$7.7545 at 4:53 p.m. in Hong Kong, data compiled by Bloomberg show.

“Worries about the peg have completely receded as well as concerns about a China currency devaluation,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “The Hong Kong dollar is benefiting from this relief.”

The city’s dollar has climbed 0.83 percent since falling to an eight-year low in January amid speculation that its link to the greenback could be scrapped and as concern about China’s economic slowdown led to outflows from the city. The yuan traded in Hong Kong has jumped 3.3 percent from a five-year low in January after authorities intervened to support the currency and officials said there’s no basis for a continued depreciation.

A gauge of mainland Chinese shares listed in Hong Kong has risen 19 percent from this year’s low to approach a bull market amid rebounding commodity prices and speculation the nation’s policy makers will take steps to support economic growth.

The Hong Kong Monetary Authority has reiterated its commitment to keeping the linked exchange-rate system intact. The Hong Kong dollar has been pegged within its current range since 2005. It was linked to its U.S. counterpart in 1983, when negotiations between the U.K. and China over the city’s return to Chinese rule spurred an exodus of capital.

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