The currency eased to HK$7.8417 per US dollar on Friday, the weakest since August 2025, and is on track for a third straight week of losses.
The move is putting the spotlight on Hong Kong’s currency peg and local borrowing conditions. Traders are watching whether the widening gap between Hong Kong and US interest rates will continue to fuel capital outflows and push the currency even closer to the weak end of its HK$7.75-HK$7.85 trading band.
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A gauge of US dollar strength has gained 2.2% this month after the Federal Open Market Committee meeting last week bolstered expectations that policymakers may raise rates later this year. Bank of America this week revised its forecast, now expecting three quarter-point rate increases in 2026.
Meanwhile, borrowing costs in Hong Kong have continued to fall. The one-month Hong Kong Interbank Offered Rate, or Hibor, fell 0.6% Thursday, widening the gap with the US. That makes it more attractive for investors to fund carry trades by borrowing and selling Hong Kong dollars to buy higher-yielding assets.
Hong Kong equities are also on track for their first annual decline in three years, adding to the capital outflows that have weighed on the currency.
