Hong Kong dollar peg under pressure as foreign reserves dwindle

Interest rate gap and property downturn weigh on city's currency defenses

20221027N Hong Kong dollar coin

The Hong Kong dollar, pegged to the U.S. greenback, has suffered a heavy sell-off due to the Fed's rate increases.  © Reuters

TAKESHI KIHARA, Nikkei staff writer

HONG KONG -- The Hong Kong dollar's peg to the greenback faces mounting headwinds as investors dump the city's currency in response to a growing interest rate gap with the U.S., forcing its de facto central bank to spend billions to defend its target trading band.

"With the dollar at historic highs and companies and talent leaving Hong Kong, there aren't any big players buying the Hong Kong dollar," said a currency dealer in the city.

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