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U.S. Dollar / Hong Kong Dollar

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USDHKD trade ideas

hong kong (inflation, instability, and implications for taiwan)next week we take a peak in hong kong pce inflation. the spike last month is a contributing factor to the situation there. i see the trend of inflation to continue. stimulus measures put in place may actually contribute to the fire. the inflation is due to mainland china devaluation ie import inflation export deflation. the question is, will xi crush hong kong and what does that mean long standing defense deals with taiwan? this is a turning point in us-chinese relations if XI chooses to crush. if XI doesnt crush he looses face in the mainland. hopefully an agreement can be reached, but know theres a cause for the situation and an after effect that could go beyond trade
by The_dumpster_diver
Hong Kongers want Massive WithdrawalsFX News – As the protests in Hong Kong continue, people are trying out something new to fight back. Protesters are calling for massive ATM withdrawals, taking out as much money as possible from their banks. They could also change their currency into US dollars to protect their own assets. The goal is to send the People’s Republic of China and HK Chief Executive Carrie Lam a message. And that message is this: Hong Kong is more than just a city with cash. According to the student who started the “Cashout HKD to USD,” the people have already withdrawn over HK$70 million. According to this student, the tactic would work because Lam and the PBOC “care much about the economy.” The protests have been going on for nearly 11 weeks. FX News: the Demands of the Protesters The movement, according to the student, demands five things from the Hong Kong government. The first one is to completely withdraw the extradition bill, not just suspend it. The bill, which has initially been the center of the protests, would allow extradition to China for criminal offenses. For the Hong Kongers, this would allow the authoritarian China greater control over democratic Hong Kong. The second demand is to retract the proclamation that the protests were riots. Third, pull out the criminal charges against protesters and investigate police abuses toward them. Fourth is to dissolve the Legislative Council by administrative order. And lastly, implement the dual universal suffrage. Put simply, this would allow Hong Kongers to vote on their leaders without having to ask China’s permission. Meanwhile, other activists voiced out concerns over Hong Kong’s currency because of the instability. This is where the rationale of converting their currency into the US dollar comes into play. The goal is to maintain value in US dollars and other foreign currencies. This is among the biggest protests in the recent history of Asian countries.
Short
by Financebroker
Hong Kong to break US Dollar Peg?What a week so far. This week we saw the USDCNH break above the 7.00 level, something I have mentioned in my posts for Bitcoin strength. China has said this was normal, due to tariffs and fundamental reasons, while President Trump and the US Treasury think it is an act of currency manipulation. I have spoken about the US and China trade war on my blog. China is in it for the long game. They will be patient for a weaker US President from the Democrat side. They know the US stock markets are President Trump's Achilles Heel. He needs them up to win re-election ('Keeping America Great"). If markets continue to tumble it will be President Trump who is forced to the trade table to take a China dictated deal. China does not need to worry about elections. So as the Yuan devalues, Chinese money is running into Gold and Bitcoin as mentioned in my previous posts. All governments are devaluing their currencies. New Zealand just cut rates 50 basis points yesterday! Mainland China has been coming down hard on Hong Kong, attempting to get rid of the British Law. This is a way to stop money leaving from China (generally money from mainland goes to Hong Kong and then from there to Australia or Canada etc) and was also a way for China to get away from tariffs by shipping from Hong Kong (not under tariffs). Hong Kong is in trouble. It is the most expensive city in the world with a large real estate bubble and there are some credit and debt problems there now. If you listen to Kyle Bass, he has said that Hong Kong has used 80% of their US Dollar reserves to maintain the peg under 7.85. Will this peg be broken? Many think so. They are running out of US Dollars and not in the best position to buy more Dollars. If the Chinese army does march into Hong Kong, which is probable, expect the HKD peg to break. Probably will peg to the Yuan. As Kyle Bass has said, shorting Hong Kong is the best play right now. Many hedge fund managers have spoken on this as well. Shorting the Hang Seng and the Hong Kong Dollar are ways to play this trade. Why will China march into Hong Kong? If the people are up in arms due to Yuan devaluation, and the Chinese Communist Party feels threatened, they will go to war. The CCP will not give up control over China. War is the best way to unify the people and also blame others for domestic problems. When all else fails, they take you to war. When this peg breaks, I expect MORE Hong Kong money to run into Bitcoin and Gold and Silver. So I am still bullish on Bitcoin but remember, as discussed previously, it is all about CHINESE MONEY.
Long
by Uncharted-FX
5
USDHKD and the HKMA delimaNot my own idea but Kyle Bass points out 80% of the HKMA's "war chest" currency board reserves have been used maintaining the upper peg. Trumps trade war is putting extra pressure on this peg breaking. Last time we saw a peg break was the SNB Frac's +30% 1500+ pips in 5 minute appreciation. There are only three routes for them they can raise more money in the domestic economy, they can raise HKD interest rates, or they can break the peg back to a free float system like the SNB.
Long
by NervaTech
4
Hong Kong Dollar Strengthens on Rate SpikeThis is an excerpt from MACRO BRIEF: Hong Kong Dollar Strengthens on Rate Spike originally published March 10, 2019. The short-HKD trade is nearly consensus, which reminds me of the short-yuan trade a few years ago that was largely snuffed out by the PBOC. Problem here, though, is the HKMA's attempts to draw in HKD inflows have been superficial at best. Additionally, with China likely continuing using Hong Kong as a dollar ATM it is hard to estimate how long the strength would last. The 3.7 sigma move has pulled in quite a bit but still remains extended. 7-day ROC saw its largest spike since December when the HIBOR 1M and 3M futures converged. We'll continue to monitor the situation, but prolonged elevation of rates could be a problem considering that Hong Kong's economy is strongly interest rate sensitive with banking assets and domestic credit to public sector as a percentage of GDP at well over 200 percent. To access original charts and commentary on this blog post click here .
by TheMacroStrategist
Shanghai Composite / S&P 500 ratio & The USDHKD PegUnsurprisingly, similar to the currency, the outperformance of the Chinese stock market vs. the S&P 500 falters when the Chinese currency can't be sustained. Not quite as direct of a relationship, but this clearly affects emerging markets, which are highly indebted to the dollar. This is visible if you go back further as well - the broad rolling emerging market problems all occurred starting when the USDHKD peg was hit in April 2018. April 18th, 2018 was a pivotal day in that regard. Also, it's no surprise that EM currency problems are starting to suddenly become problematic once again....
by GTStockmaster
USDHKD and its relationship to Emerging Markets vs. US EquitiesUSDHKD is a proxy for monetary "stuff" going on in China. China can stimulate when this peg is not being hit as most of their dollar funding seems to be running through Hong Kong. When the peg gets hit however, we see noticeable problems and effects around the world. We are now about to see the peg get re-hit once again, which will likely kick off another wave of unexpected monetary issues around the world similar to what we saw last April. We will likely see more emerging market underperformance once again relative to US equities if this is in fact indicative of what is going on in the shadows.
by GTStockmaster