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The Hong Kong dollar peg is feeling the strain

HONG KONG  The week of Jan. 18 stirred up some bad memories in Hong Kong. The Hong Kong dollar's spot rate against its U.S. counterpart tumbled, Hong Kong dollar forwards sank below the level permitted by the linked exchange rate system, and interbank loan rates spiked to their highest level since 2008.

     Although Hong Kong's liquidity squeeze is a blip compared with the turmoil brought by the Asian financial crisis of 1997, anxiety immediately spilled over to the stock market, dragging the benchmark Hang Seng Index down 3.8% and pulling the Hang Seng China Enterprises Index 4.3% lower on Jan 19.

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