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Hong Kong Dollar Traders Brace for Rate Spike Amid Intervention

  • One-year interest rate swap near highest level since 2018
  • Rates not high enough to alleviate Hong Kong dollar drop: OCBC
Updated on

Hong Kong dollar traders are girding for tighter liquidity in the banking system as the city’s de facto central bank drains cash to maintain the currency’s peg to the greenback. 

The city’s one-year interest rate swap -- a gauge of expectations for interbank liquidity in the future -- jumped to the highest since December 2018 last week. That’s following the Hong Kong Monetary Authority’s currency purchases after the local dollar breached the weak end of its 7.75-7.85 per greenback trading band for the first time since 2019.