Pressure on Hong Kong dollar set to continue despite a dovish Fed

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Hong Kong

Hong Kong’s de facto central bank is expected to continue its interventions to defend the Hong Kong dollar in the near future, as capital outflows test the peg with the greenback.

Shorting the Hong Kong dollar will remain profitable until the gap between the two currencies’ borrowing costs drops sharply from the current highs, which is not likely to happen in the next few months despite a dovish Federal Reserve, analysts say.

However, there will not be a squeeze in interbank liquidity since

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