HKMA chief Eddie Yue said last month’s Fed rate hike — the first in three years
— widened the HK–US rate gap and contributed to HKD softening. The HKD traded
around 7.8300–7.8380 in April–May then weakened from mid‑June to about
7.8460–7.8475, approaching the weak‑side convertibility undertaking at 7.85 per
USD. Yue cited two main drivers: carry trades prompted by the wider rate
differential and a drop in HKD demand linked to the equity market. Near‑term
currency moves will depend on capital market activity, appetite for carry
trades, local liquidity and the Fed policy outlook. If the HK–US rate gap stays
wide, the linked exchange rate system’s automatic rate adjustment could push the
HKD weaker and potentially trigger the weak‑side convertibility undertaking,
which would lower banks’ aggregate clearing balances and lift Hibor —
stabilizing the rate within the 7.75–7.85 band; timing of any The trigger is uncertain.
