When pegs fly: Trump-induced turmoil hits Hong Kong dollar

US President Donald Trump’s erratic policies are rattling a currency peg that has withstood the test of time and is seen as an anchor for China and Asia.

- RAE WEE JIAXING LI

The Hong Kong dollar has whipsawed from one end of its narrow trading band to the other versus the greenback in just a month.

While the latest volatility is not seen as a threat to the four-decade-old peg, it has had a dramatic impact on interest rates, providing a challenging environment for businesses and investors in the financial hub. The stress on one of the world’s best-known currency pegs underscores how volatility of the US dollar under Trump is disrupting even the most stable corners of the market.

Interest rates in Hong Kong have tended to move in lockstep with the United States, keeping the Hong Kong dollar, which trades between 7.75 and 7.85 per US dollar, relatively stable.

But they have decoupled over the past month as global investors cooled on US assets and fretted about Washington’s growing debt pile, while massive capital entered Hong Kong as foreigners flocked to blockbuster share offerings. Chinese investors have also ploughed record amounts of money into Hong Kong-listed stocks.