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Longest Hong Kong Dollar Rally in Eight Years Is Burning Shorts

  • Currency has risen for seven days on elevated borrowing costs
  • Volatility has come as the pool of interbank liquidity shrinks
Chinese Yuan, Hong Kong Dollar and U.S. Dollar Banknotes
Photographer: Paul Yeung/Bloomberg
Updated on

Hong Kong dollar bears are abandoning bets the currency will weaken, squeezed by the longest streak of gains in more than eight years.

The local dollar rose 0.07% to 7.7868 versus the greenback on Tuesday, taking its seven-day gain to about 0.5% -- a large move for a pegged exchange rate. Supporting the advance are bets that borrowing costs will remain elevated versus falling U.S. dollar rates, as banks hoard cash for year-end regulatory checks. An easing of trade tensions between China and the U.S. has also helped, as foreign funds snap up stocks in Hong Kong.