Markets are once again seriously testing the USD/HKD peg’s upper barrier but this time under the auspices of an administration facing local opposition. Banks sound-off about the threat against the peg.
The 7.75-7.85 Hong Kong dollar (HKD) per $1 trading band has held true since 2005 from a stable currency peg established in 1983. Despite an impressive track record of unwavering resilience (and nearly $450 billion in foreign reserve), option traders have recently been betting on its fall.
According to a «Bloomberg» report in mid-August, implied probability from the market signals a more than 50 percent chance for the HKD to breach the 7.90 level in the coming six months (at the time of publishing, markets may have made meaningful adjustments especially due to a surprise move by the Hong Kong chief executive Carrie Lam to withdraw the extradition bill, the primary trigger that led to widespread public opposition).
What say the banks?
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