Archive · 21 Jun 2025
HKD Falls, US Interest Rates Steady, Investors Wary
Imagine two friends, the US and Hong Kong.
Hong Kong's money (HKD) is usually worth a set amount compared to the US dollar (USD).
Recently, the HKD got a little weaker against the USD.
The US has kept its interest rates steady, but the difference between interest rates in Hong Kong and the US has grown, and this has led to worries.
Investors are hesitant to use the HKD to try and make a profit.
This is happening because some people are less confident in the US and its financial policies.
In Hong Kong, lower interest rates are good news, possibly helping the economy.
The Hong Kong dollar (HKD) declined to the lower end of its trading range against the US dollar (USD).
The US Federal Reserve held interest rates steady, with the benchmark lending rate remaining in the 4.25% to 4.5% range.
The gap between the Hong Kong Interbank Offer Rate (HIBOR) and the US interbank rate widened.
Asian currencies have appreciated against the USD since May 2023, potentially indicating declining trust in US assets.
Hong Kong authorities welcome low interest rates, which could boost consumption and stabilize property prices.
- Who
- The US Federal Reserve, the Hong Kong Monetary Authority (HKMA), and investors.
- What
- The Hong Kong dollar declined, the US Federal Reserve held interest rates steady, and there's concern about investor confidence in US assets.
- When
- The Hong Kong dollar decline occurred in June, with the US Federal Reserve's announcement earlier in the week.
- Where
- Hong Kong and the United States.
- Why
- Due to factors including the widening gap between interest rates in Hong Kong and the US and potentially, decreased trust in US assets.
Investors
Hong Kong Authorities
Confidence in US Assets
Investors
Wary of US assets due to tariff policies
Hong Kong Authorities
Appreciated Asian currencies
Arbitrage Opportunity
Investors
Unwilling to pursue arbitrage due to fear.
Hong Kong Authorities
Opportunity is considered easy money
- HKD Trading Range
- 7.75-7.85 HKD per USD
- US Fed Interest Rate
- 4.25% - 4.5%
- US Inflation Rate (May)
- 2.4%
- HKMA Intervention
- Sold HKD 129.4 billion in exchange for USD 16.7 billion in early May
- HIBOR
- Lowest in three years, about 0.5%