A rally in the Hong Kong dollar that saw it touch the strongest level this year against the greenback is likely to continue due to a seasonal liquidity squeeze.
The currency has climbed 0.4% this month, set for its best gain since July, after rising to as high as 7.7895 per dollar on Tuesday.
Fueling the rally are bets that funding costs will remain elevated versus interest rates on the greenback, as local lenders hoard cash for year-end regulatory checks. That makes the so-called carry trade of selling the Hong Kong dollar against American assets unprofitable, forcing short-sellers to stop losses and quickening the advance.
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