Long term currency investors may want to monitor HK Dollar
USDHKD is creeping towards 7.75. A collision will take place between currency investors, traders and Hong Kong Monetary Authority when this exchange rate goes below 7.75.
At the moment, the Hong Kong Dollar is pegged to the USD at 7.80 with upper and lower limits of 7.75 and 7.85. USDHKD is not a currency pair one will consider trading but there is fruit for thought if one considers the benefits of a long term currency investment. Especially as the fundamentals between US and Hong Kong economy continues to diverge.
What happened the last time USDHKD traded below 7.75?
Massive intervention by the Hong Kong Monetary Authority.
Oct 20 (Reuters) – The Hong Kong Monetary Authority (HKMA) stepped in to the currency market on Saturday for the first time since December 2009 as capital inflows strengthened the Hong Kong dollar, causing it to hit the top end of its trading range.
The HKMA sold $603 million worth of Hong Kong dollars at the strong-side of the trading range of HK$7.75 to a U.S. dollar in a move that will lift its aggregate balance — the sum of balances on clearing accounts maintained by banks with the authority — to HK$153.3 billion on Oct. 24.
Nov 29 (Reuters) – The Hong Kong Monetary Authority (HKMA) stepped into the currency market on Thursday, selling HK$3.875 billion ($500 million) in Hong Kong dollars as the local currency repeatedly hit the strong end of its trading range.
Dec 11 (Reuters) – The Hong Kong Monetary Authority (HKMA) stepped into the currency market on Tuesday, selling HK$6.2 billion ($800 million) in Hong Kong dollars as the local currency repeatedly hit the strong end of its trading range.
It was the second injection this week. Before this intervention, the HKMA had sold a total of $7.7 billion worth of Hong Kong dollars into the market since October 20.
Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.
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