Hong Kong's Crowded Currency Trade Enters Perilous Territory
- Hong Kong dollar’s steady decline abruptly reversed Wednesday
- Carry traders had been positioned for further weakness
A Hong Kong 100 dollar banknote.
Photographer: Brent Lewin/BloombergThis article is for subscribers only.
One of the world’s most reliable currency bets is suddenly looking like less of a sure thing.
The Hong Kong dollar carry trade, which has produced steady returns for seven straight months, suffered a rare setback on Wednesday as the currency abruptly strengthened the most since February 2016. Its 0.1 percent gain against the U.S. dollar may have been tiny by global standards, but it jolted investors who had positioned for declines by borrowing in Hong Kong to invest in higher-yielding American assets.