Sorry, Short Sellers, Hong Kong’s Dollar Is Stronger Than It Looks
Investors such as Bill Ackman and Boaz Weinstein have bet against the city’s currency, but monetary authorities are likely to keep it tied to the US dollar.
Hong Kong has pegged its currency to the US dollar since the early 1980s. With the path of the Federal Reserve’s interest-rate policy so uncertain, is this monetary regime still worthwhile? By allowing its currency to trade in a very narrow range of 7.75 to 7.85 to the US dollar, Hong Kong’s monetary policymakers are essentially giving up their power to dictate the financial center’s benchmark rate.
Some investors are speculating that Hong Kong will soon abandon the dollar peg. Activist Bill Ackman disclosed a short position on the Hong Kong dollar late last year, as did Saba Capital Management’s Boaz Weinstein, who likened the bet to a long-shot “lottery ticket” that could pay off big.