【is new found glory a christian band】Hong Kong dollar pressured as local yields tumble
* HKD could hit 7.85 per dollar band within weeks
* Hong Kong rates lag U.S. most since financial crisis
* Softer Chinese economy,is new found glory a christian band dovish Fed the main culprits
By Noah Sin
HONG KONG, Feb 1(Reuters) - Excess cash in Hong Kong's banking system has caused the local dollar to weaken so far in 2019, and traders expect the pegged currency will soon test the lower end of its tight band against the U.S. dollar.
The Hong Kong dollar has fallen more than half a percent since early December, when it was trading close to the middle of its 7.75-7.85 band against the U.S. dollar. It was quoted at 7.8456 on Friday
Analysts say that decline is being driven by falling local interest rates.
One-month inter-bank rates(HIBOR) have fallen 139 basis points since mid-December, mimicking a drop in U.S. yields as expectations rose for the Federal Reserve to slow its pace of monetary tightening.
That caused spreads between Hong Kong and U.S. yields to widen, with the one-month rate 1.49 percentage points below dollar rates on Wednesday, the widest since January 2008.
The widening spread led investors to borrow the Hong Kong dollars cheaply and use that to buy higher-yielding U.S. dollar assets in a carry trade, spurring capital outflows and pressure on the local currency.
The currency is in danger of breaching the top end of its 7.75-7.85 range in the first quarter, said Cliff Tan, Hong Kong-based East Asian head of global markets research at MUFG.
With the Fed hinting this week at a pause to further rate hikes, "there will be nothing but red meat for this kind of trade,” said Tan.
Such carry trades had become unviable in the second half of 2019 as rising U.S. yields and demand in Hong Kong for new share issues caused HIBOR to rise.
But Hong Kong rates slumped again early in 2019 on weaker loan demand "due to China’s easing policy and concerns about economic outlook,” Tommy Xie, an economist at OCBC in Singapore, said in a note this week.
China's economy grew at its slowest pace in 28 years in 2018 and is expected to cool further this year, pressured by sluggish domestic demand and disruptions in its supply chains as the Sino-U.S. trade war escalated.
Hong Kong’s retail sales grew at the slowest in 18 months last December.
FALLING BEHIND
The Hong Kong Monetary Authority would be obliged to buy the local dollar if it hits the weak end of the band.
Hong Kong's base rate moves in lockstep with that of the United States as part of its commitment to a currency peg. But commercial lending rates are determined by banks and widely-watched in the city, one of the most expensive housing markets in the world.
With ample capital chasing deposits, as represented by the HK$76.2 billion ($9.71 billion) aggregate balance, “banks don’t have incentives to raise rates" at this point, said Ivy Wong, managing director at Centaline Mortgage Broker in Hong Kong.
Local banks lifted benchmark lending rates for the first time in 12 years last September, but refrained from following the Fed in hiking again in December.
One-month HIBOR was 1.01 percent on Friday, while three-month HIBOR stood at 1.72 percent.
($1 = 7.8456 Hong Kong dollars) (Editing by Vidya Ranganathan and Kim Coghill)
View comments
(责任编辑:Entertainment)
- Loop Industries Reports Fourth Quarter Consolidated Financial Results of Fiscal 2020 and Provides Updates on Business Developments
- Survey Says: Watch Out for Attorneys With Their Lies, Expletives and Nasty Email
- Backstop is only solution to Irish border issue - German justice minister
- No to Bitcoin Cash: OpenNode Rejects Roger Ver’s $1.25m Fund Offer
- Berkshire Hathaway annual meeting 2020: 5 things to know
- Biden Holds onto a Winning Margin in the Polls after the 1st Debate
- Golden Globes’ Most Under-Dressed Stars, From Jason Sudeikis to Jodie Foster
- Top Smart-Home Stock to Buy in 2019: Amazon
- What Percentage Of Alexium International Group Limited (ASX:AJX) Shares Do Insiders Own?
- CMA CGM Donates 200,000 Face Masks
- Hometown protest greets Schultz as he eyes 2020 bid
- Asian stocks mixed as China-US talks end with no deal
- A Note On DTE Energy Company's (NYSE:DTE) ROE and Debt To Equity
-
NEW YORK, NY / ACCESSWIRE / May 5, 2020 /Labaton Sucharow LLP, a leading and award winning investor ...[详细]
-
UK factories build up stockpiles before Brexit, boosting PMI
By William SchombergLONDON (Reuters) - British factories ramped up their stockpiling in December as ...[详细] -
What Is Hope Bancorp, Inc.'s (NASDAQ:HOPE) Share Price Doing?
Hope Bancorp, Inc. (NASDAQ:HOPE), operating in the financial services industry based in United State ...[详细] -
U.S. State Department bans business with Cuban bank BFI
WASHINGTON, Jan 1 (Reuters) - The U.S. State Department on Friday added a Cuban commercial bank to i ...[详细] -
VANCOUVER, British Columbia, May 01, 2020 (GLOBE NEWSWIRE) --Global Care Capital Corp.(CSE:HLTH,OTC: ...[详细]
-
Los Angeles - (NewMediaWire) - December 31, 2021 - The Schall Law Firm, a national shareholder right ...[详细]
-
CenterPoint Energy (NYSE:CNP) Is Increasing Its Dividend To US$0.17
CenterPoint Energy, Inc.'s(NYSE:CNP) dividend will be increasing to US$0.17 on 10th of March. Even t ...[详细] -
Brinker International Enters Oversold Territory
Brinker International, Inc.EAThas been on a bit of a cold streak lately, but there might be light at ...[详细] -
Notification of Major Holdings
TR-1: Standard form for notification of major holdingsNOTIFICATION OF MAJOR HOLDINGS(to be sent to t ...[详细] -
N.Korea wanted most sanctions lifted in exchange for partial Yongbyon closure -U.S. official
March 1 (Reuters) - North Korea proposed to close down a portion of its Yongbyon nuclear complex in ...[详细]
EU open to compensating firms hit by coronavirus, more help for Italy
Thomas Reid Leaving Davis Polk to Join Comcast as Senior EVP
- These ETF Areas Make Great Investment Choices in June
- Why the Earnings Surprise Streak Could Continue for Logitech (LOGI)
- Don't Sell Air Canada (TSE:AC) Before You Read This
- Deutsche Telekom sues German government over 5G auction - Welt
- Barry Manilow and Darryl Payne Settle Copyright Dispute
- Hacked 9/11 Docs Weren't Stolen From Husch Blackwell, Firm Says
- Biden's Treasury nominee Yellen discloses paid speaking gigs for financial firms