Group 1 - The Federal Reserve has maintained the federal funds rate target range at 4.25-4.5%, aligning with market expectations [1] - There is significant uncertainty regarding the future pace and magnitude of interest rate cuts by the Federal Reserve, which will depend on U.S. inflation and employment data [1] - The Hong Kong Monetary Authority (HKMA) noted that the local interest rate environment may change due to various factors, and residents should consider the potential for rising Hong Kong dollar interest rates when making financial decisions [1] Group 2 - The interest rate differential between Hong Kong and the U.S. remains attractive for carry trades, keeping the Hong Kong dollar close to the 7.85 level [2] - Recent demand for Hong Kong dollar liquidity related to stock investments has provided some support for the currency [2] - Future considerations include changes in Hong Kong dollar supply and demand, uncertainties surrounding U.S. monetary policy, and global financial market conditions, which may trigger the "weak side convertibility guarantee" again [2]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) responded to the Federal Reserve's decision to maintain interest rates, which aligns with market expectations. The current interest rate differential between Hong Kong and the U.S. remains attractive for carry trades, keeping the Hong Kong dollar close to the 7.85 level [1] Group 1 - The demand for Hong Kong dollar liquidity related to stocks has been strong, providing support for the currency [1] - Future movements in the Hong Kong dollar will depend on changes in liquidity supply and demand, as well as uncertainties such as U.S. monetary policy, interest rate trends, stock market sentiment, and global capital flows [1] - The weak-side convertibility guarantee may be triggered again, leading the HKMA to buy Hong Kong dollars and sell U.S. dollars, which would decrease the banking system's surplus and gradually increase Hong Kong dollar interbank rates [1] Group 2 - There is significant uncertainty regarding the future pace and extent of U.S. interest rate cuts, which may also affect Hong Kong's interest rate environment [1] - The HKMA will continue to closely monitor market changes to maintain monetary and financial stability [1]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) intervened in the market by purchasing HKD 39.25 billion due to the Hong Kong dollar reaching the weak end of its peg [1] Group 1 - The intervention was triggered as the Hong Kong dollar hit the weak side of the currency peg, which is a mechanism to maintain the currency's value [1] - The amount of HKD 39.25 billion reflects a significant market operation aimed at stabilizing the currency [1]

Group 1: Open Market Operations - The central bank conducted a 7-day reverse repurchase operation of 84.7 billion yuan at a fixed rate of 1.40% on July 11, with a net injection of 50.7 billion yuan for the day after accounting for 34 billion yuan in reverse repos maturing [1] - A total of 425.7 billion yuan in reverse repos will mature from July 14 to 18, with specific maturities of 106.5 billion, 69 billion, 75.5 billion, 90 billion, and 84.7 billion yuan on respective days [1] Group 2: Liquidity Conditions - The overnight pledged repo rate for deposit-taking institutions increased by 2 basis points to 1.34%, while the 7-day pledged repo rate decreased by over 2 basis points to 1.47% [3] - The latest overnight financing rate in the U.S. stands at 4.32% [3] Group 3: Interbank Certificates of Deposit - The latest transaction rate for one-year interbank certificates of deposit among major banks is around 1.63%, showing a slight increase from the previous day [6] Group 4: Bond Market - The yields on major interbank bonds showed mixed movements, with the 30-year main contract rising by 0.05%, while the 10-year and 5-year main contracts fell by 0.02% and 0.01% respectively [12] - The Ministry of Finance plans to issue 30 billion yuan in 91-day discount treasury bonds on July 14 [18] - The National Development Bank will issue up to 11 billion yuan in two tranches of financial bonds on July 14 [18] - The Agricultural Development Bank will issue up to 25 billion yuan in three tranches of financial bonds on July 14 [18] Group 5: Global Macro Events - U.S. President Trump announced a 35% tariff on Canadian products starting August 1 [15] - The Bank of Japan introduced a new lending operation to support market liquidity by allowing investors to borrow recently issued Japanese government bonds [15] - The UK economy has contracted for the second consecutive month, with a GDP decline of 0.1% in May, influenced by U.S. tariffs and multiple cost pressures [15]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) has demonstrated the orderly operation of the linked exchange rate system amid changing market liquidity and persistent interest rate differentials between Hong Kong and the U.S. [1][2] Group 1: Market Dynamics - The HKMA President noted that the Hong Kong dollar (HKD) has seen a significant inflow of funds, with the banking system's HKD surplus rising from approximately HKD 45 billion to over HKD 170 billion, indicating a very ample liquidity situation [1] - The demand for HKD has changed, with a strong demand observed from May to June, but factors such as the peak of dividend payouts and the return of funds from non-local companies have reduced this demand [1] Group 2: Interest Rate and Exchange Rate - The interest rate differential between Hong Kong and the U.S. remains wide, making arbitrage trading profitable and keeping the HKD close to the 7.85 level [2] - The HKMA emphasizes that the primary policy goal of the linked exchange rate system is to maintain the stability of the HKD, rather than targeting interest rates [2]

Core Viewpoint - The current Hong Kong dollar (HKD) market dynamics indicate a significant interest rate spread between Hong Kong and the US, making carry trades still profitable and keeping the HKD close to the 7.85 level [1] Group 1: Market Conditions - The interest rate differential between Hong Kong and the US remains wide, which supports the profitability of carry trades [1] - The HKD is expected to remain near the 7.85 level due to supply and demand changes in HKD funds and other uncertainties, including US Federal Reserve monetary policy and global financial market conditions [1] Group 2: Potential Triggers - The "weak side convertibility guarantee" may be triggered again, with its extent and timing influenced by market conditions, particularly the supply and demand for funds [1] - As the HKD supply and demand approach balance, an upward adjustment in HKD interbank rates may become more apparent, indicating increased sensitivity of HKD interbank rates to market liquidity changes [1] Group 3: Future Expectations - Market participants should be prepared for potential upward adjustments in Hong Kong interest rates [1]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) activated the "weak-side convertibility guarantee" under the linked exchange rate system, selling USD and buying HKD worth 94.2 billion HKD, as the HKD weakened to 7.85 HKD per USD during the New York trading session on June 26 [1] Group 1 - The last occurrence of the "weak-side convertibility guarantee" was in May 2023, while the "strong-side convertibility guarantee" was triggered on May 3, 2023, when the HKD reached 7.75 HKD per USD [1] - HKMA's President, Eddie Yue, noted that the HKD had previously seen a capital inflow of 129.4 billion HKD due to the "strong-side convertibility guarantee" in May, indicating a shift in market dynamics [1] - Factors contributing to the HKD's weakening include reduced demand for HKD due to the end of the dividend payout season, non-local companies converting HKD from IPOs or bond issuances back to their currencies, and the completion of half-year funding needs [1] Group 2 - The HKMA emphasizes the importance of maintaining HKD exchange rate stability as part of its monetary policy objectives, given Hong Kong's open economy and lack of foreign exchange controls [2] - The HKMA provides convertibility guarantees, committing to sell HKD at the "strong-side" level of 7.75 HKD per USD and buy HKD at the "weak-side" level of 7.85 HKD per USD upon banks' requests [2] - Eddie Yue advised caution in managing interest rate and market risks, indicating that the HKD may trigger the "weak-side convertibility guarantee" again in the future as bank reserves decrease and HKD interbank rates may rise [2]

Core Viewpoint - The Hong Kong dollar has fallen to the weak end of its trading band against the US dollar for the first time since 2023, with the exchange rate reaching 7.85 [1] Group 1 - The Hong Kong dollar to US dollar exchange rate has hit the weak end of the trading band, indicating potential pressure on the currency [1]

Core Viewpoint - The Hong Kong dollar has reached the weak end of its trading band against the US dollar, hitting 7.85 for the first time in over two years [1] Group 1 - The Hong Kong dollar's exchange rate has touched the weak side convertibility guarantee level of 7.85 against the US dollar [1] - This marks the first occurrence of the Hong Kong dollar reaching this level in more than two years [1]

Core Viewpoint - The Hong Kong dollar (HKD) has recently experienced significant fluctuations against the US dollar, triggering both the "strong-side convertibility guarantee" and the "weak-side convertibility guarantee" due to changes in liquidity and interest rates [1][2]. Group 1: Currency Exchange and Monetary Policy - On April 30, the HKD/USD exchange rate hit 7.75, activating the "strong-side convertibility guarantee" [2]. - From May 3 to 6, the Hong Kong Monetary Authority (HKMA) injected a total of 129.4 billion HKD into the market, leading to an expansion of HKD liquidity [2]. - The injection of HKD significantly lowered the HIBOR rates, with the 1-month HIBOR dropping from 3.65% in April to 0.67%, and overnight rates approaching 0% [2]. Group 2: Market Reactions and Expectations - The widening of the HKD-USD interest rate differential (HIBOR-SOFR) has prompted carry trades, resulting in a depreciation of the HKD, which is now approaching the "weak-side convertibility guarantee" at 7.85 [2]. - The HKMA is expected to tighten liquidity in the short term, which may alleviate the depreciation pressure on the HKD as HIBOR rates rise again [2]. - Historically, the HKD has touched the "weak-side convertibility guarantee" four times since 2017, leading to pressure on the Hang Seng Index and Hang Seng Tech Index during those periods [2].