Hong Kong Money Markets Show Investor Calm Is Starting to Crack
- Liquidity tightest since aftermath of Asian financial crisis
- Signs of stress have emerged as protest intensity increases
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Cracks are starting to emerge in Hong Kong’s currency and money markets, as traders speculate the local dollar’s resilience to increasingly violent protests won’t last.
Hong Kong stocks were already showing signs of stress, losing more than 5% over the past week. Now, liquidity conditions in the foreign-exchange market are the tightest since the late 1990s, or the aftermath of the Asian financial crisis. Interbank rates are climbing -- making funding costs more expensive for banks -- while a gauge of expected swings in the Hong Kong dollar is near its highest in more than two months.