Hong Kong Dollar Drop Has Origin in Property-Lending Rumbles
- Currency is at its weakest against greenback since early 2016
- Interest-rate divergence between Hong Kong and U.S. widens
Hong Kong Dollar Falls at Fastest Pace in 14 Months
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Where U.S. interest rates go, Hong Kong’s follow. At least that’s the theory with the territory’s pegged currency system.
It’s not always the case. There was a sharp divergence in rates in 2003, when Hong Kong’s economy was hit by the impact of the deadly SARS virus, causing a drop in lending that generated a surfeit of liquidity, driving down rates. Local dynamics are causing a gap again, though now it has nothing to do with face masks -- it’s all about real-estate lending.