China Economics

China Economics Update

13 April, 2018

Hong Kong interest rates to rise as liquidity tightens

The HKMA’s sales of foreign exchange FX to support the Hong Kong dollar, which hit the weak end of its trading band this week for the first time since 2005, shows the exchange rate regime working as intended and isn’t a sign that the peg is under threat. Instead, we’re more concerned that continued FX intervention will cause local interest rates to jump in coming months and put the city’s overheated property market under strain.

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