Core Viewpoint - The Hong Kong interbank offered rate (HIBOR) has been rising, with the one-month HIBOR reaching 2% on August 18, marking a new high since May 8, indicating a shift in the banking system's liquidity and interest rate dynamics [1][2] Group 1: Banking System and HIBOR Trends - The banking system's surplus has decreased from a high of 1,740 million HKD in May to approximately 537 million HKD, nearing levels before the Hong Kong Monetary Authority (HKMA) intervened in early May [1] - The continuous rise in HIBOR over four consecutive working days suggests a tightening liquidity environment, with the actual mortgage rate now at 3.3%, still below the market cap of 3.5% [1][2] - The significant widening of the interest rate differential between Hong Kong and the U.S. has led to increased arbitrage activities, prompting the HKMA to intervene multiple times [1] Group 2: Future Expectations and Implications - The rise in HIBOR is expected to narrow the interest rate differential between Hong Kong and the U.S., reducing the incentive for arbitrage and stabilizing the Hong Kong dollar [2] - Despite the current HIBOR being over 2% lower than U.S. rates, expectations of a potential U.S. rate cut later this year could further influence HIBOR downward, with predictions of a decrease in the best lending rate (P) and capped mortgage rates by 0.25% to 0.5% [2] - Factors such as demand for Hong Kong dollars, arbitrage activities, and seasonal influences will continue to affect HIBOR fluctuations, necessitating borrowers to choose capped mortgage plans to mitigate risks associated with rising rates [2]

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) 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) has intervened in the currency market due to the Hong Kong dollar (HKD) reaching the weak end of its peg against the US dollar, leading to significant market reactions and liquidity changes [1][2][3]. Group 1: Currency Intervention - On July 4, 2025, HKMA bought HKD 29.634 billion in a single day, marking the largest intervention since 2017, as the HKD hit the weak end of the peg at 7.85 [1][2]. - Over two weeks, HKMA's total purchases reached HKD 590.72 billion, reducing the banking system's aggregate balance to HKD 1,145.41 billion [1][2]. - The rapid switch from strong to weak peg within two months is attributed to multiple factors, including widening interest rate differentials and seasonal liquidity demands [2][3]. Group 2: Market Dynamics - The interest rate differential between HKD and USD has widened significantly, with the overnight Hong Kong Interbank Offered Rate (HIBOR) at 0.02982% compared to the US Secured Overnight Financing Rate (SOFR) at 4.4%, creating a 4.37 percentage point gap [5]. - The demand for HKD has decreased due to the end of the dividend season and reduced funding needs, contributing to the currency's weakness [3][4]. Group 3: Future Outlook - Analysts suggest that the HKD may continue to face pressure towards the weak end of the peg, especially if the interest rate differential remains large and arbitrage trading persists [8][10]. - However, there are expectations that the HKD's volatility will have a diminishing impact on the Hong Kong stock market in the medium to long term, as liquidity conditions stabilize and investor sentiment improves [12].

Group 1 - The Federal Reserve's decision to maintain the federal funds rate at 4.25% to 4.5% aligns with market expectations, marking the fourth consecutive meeting without changes [1] - HSBC has announced that its prime rate will remain at 5.25%, which is also in line with market expectations, suggesting that Hong Kong banks will likely follow suit [1] - The Hong Kong property market is experiencing a recovery, driven by significantly reduced mortgage rates, lower housing costs, and increased demand for purchasing over renting [1] Group 2 - There is an expectation that the Federal Reserve may lower interest rates twice this year, potentially bringing the rate below 4% and gradually down to the low 3% range [1] - The anticipated decrease in U.S. interest rates is expected to lead to a corresponding reduction in Hong Kong's prime rate, which could drop by an additional 0.25% after a previous reduction of 0.625% [1] - The expected decline in the capped interest rate for mortgages in Hong Kong to 3.25% will lower income requirements for mortgage applicants, further supporting the local property market [1] Group 3 - The Hong Kong dollar is approaching the weak end of its trading band at 7.85, which may trigger the Monetary Authority to intervene in the market [2] - The significant disparity between Hong Kong and U.S. interest rates has led to increased arbitrage activities, and seasonal factors may contribute to a rise in Hong Kong interbank rates [2] - Despite the expected rise in interbank rates, it is anticipated that Hong Kong's mortgage rates will remain lower than levels seen before May of this year, fluctuating mainly between 1.84% and 2% to 3% [2]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) indicates that the widening interest rate differential between Hong Kong and the United States has triggered carry trades, causing the Hong Kong dollar to approach the weak end of its peg in recent weeks [1] Group 1 - The expansion of the interest rate differential has led to increased carry trading activities [1] - The Hong Kong dollar's exchange rate may weaken further if carry trades continue, potentially triggering the weak side of the currency peg [1]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) indicates that the Hong Kong dollar (HKD) interbank rates are approaching US dollar rates due to market supply and demand, with current conditions showing an oversupply of HKD funds. Future fluctuations in the HKD exchange rate and interest rates are anticipated, and citizens are advised to consider potential risks in their financial decisions [1][4]. Group 1: Market Conditions - The HKD has recently strengthened due to increased capital market activities, particularly from the southbound stock connect, with the Hang Seng Index rising approximately 10% year-to-date and the technology index up 14% [2]. - In early May, the HKMA intervened in the market, buying a total of $16.7 billion USD and selling 129.4 billion HKD, as the HKD exchange rate approached the strong-side convertibility guarantee level of 7.75 HKD to 1 USD [2][3]. Group 2: Interest Rate Dynamics - Following the HKMA's market intervention, the HKD liquidity surged nearly fourfold, increasing from approximately 45 billion HKD to about 174 billion HKD, leading to a significant drop in interbank rates, with the one-month interbank rate falling from an average of 3.65% in April to 0.96% [3]. - The overnight rate also decreased from an average of 3.41% in April to 0.03%, reflecting normal market behavior under the linked exchange rate system [3]. Group 3: Future Outlook - The future trajectory of the HKD exchange rate and interest rates remains uncertain, influenced by factors such as seasonal demand for funds from new stock offerings and dividend distributions, as well as external factors like US Federal Reserve policies and global financial market conditions [4]. - If the oversupply of HKD persists, the market forces from carry trades may weaken the HKD exchange rate, potentially leading to a rise in HKD interbank rates, which could approach US dollar rates [4].