Hong Kong dollar scores best month since 2003 as local rates hold up

The HKD rose over 0.5% MoM in March.

The Hong Kong dollar recorded its biggest monthly jump in more than 16 years in March, as local interest rates firmed on surging demand for cash, luring speculators to hold the currency.

The HKD rose over 0.5% MoM, the biggest advance since September 2003 and a sizeable move within its tight trading band of 7.75-7.85 per US dollar. The currency reached a four-year top of 7.7510 on 27 March.

Hong Kong’s widening interest rate advantage over the United States was the main driver behind its currency’s gain, analysts in the city said, as the Federal Reserve slashed interest rates to limit the economic damage from the coronavirus pandemic.

The one-month interbank rate in Hong Kong led its US counterpart by 107 basis points, the most since 2008, 26 March. Hong Kong also held a 97 basis points lead in the one-year rate earlier this month, the highest in two decades.

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