Hong Kong dollar drops most since June

This comes after Ant Group closes books for its IPO
Newsfeed30 Oct 2020
Photo credit: AFP Photo

The Hong Kong dollar moved away from the strong end of its trading band for the first time since Ant Group’s initial public offering (IPO) was mooted two months ago.

The currency declined as much 0.05% Thursday (29 October), the most since 16 June, to 7.7537 vs the greenback. It pared the drop to 7.7517 as of 3:32 pm in the city.

Ant has stopped taking orders from big investors after strong demand for its Hong Kong shares. The IPO had spurred inflows into the city in recent months, prompting repeated interventions from the Hong Kong Monetary Authority (HKMA) to stop the currency from strengthening past the limit of its band against the greenback.

The local currency may weaken to 7.7550 after Ant starts trading, said Tommy Ong, managing director for treasury and markets at DBS Hong Kong Ltd. “It’s inevitable that some capital would leave Hong Kong after Ant’s subscription for institutional investors finished,” he said.

Large-scale capital flight is unlikely, said Ong, because demand for Ant’s shares and future listings by other Chinese companies should support demand for the Hong Kong dollar, he said.

The local currency strength comes at a time when the city’s economy has been pummelled by the coronavirus pandemic. The unemployment rate has climbed to a 15-year high.

The HKMA has sold a total of HKD383.5b (USD49.5b) of local dollars since April to defend its foreign exchange peg. These moves have boosted the interbank liquidity pool to the largest level on record. The Hong Kong dollar’s one-week interbank lending rate known as Hibor fell 15 bps, the most since August, to 0.48411%. – Bloomberg News.

The US Dollar Index rose 0.59% to 93.955, the euro fell 0.61% to USD1.1674, the pound shed 0.41% to USD1.2930, and the yen weakened 0.28% to 104.61 per dollar.

The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.

The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.

The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.

DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.

To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.

The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.