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Hong Kong dollar doldrums renew doubts over U.S. peg

Carry trades exploiting yield gap puts pressure on the currency

The Hong Kong dollar is hovering along the weak end of a band pegged to the greenback after a roughly three-month reprieve.   © Reuters

HONG KONG/TOKYO -- The Hong Kong dollar's peg is once again facing trial by fire as the currency scrapes the bottom of the allowable limit amid mounting pressure from currency traders exploiting an interest rate gap and economic headwinds.

The Hong Kong dollar moves within a tight band spanning 7.75 and 7.85 against the U.S. dollar. Whenever the currency touches either of the two bounds, the Hong Kong Monetary Authority (HKMA), the de facto central bank, moves to intervene.

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