HKD Weighed Down by Fed Rate Hike

Hong Kong's financial scene is shifting after the US Federal Reserve's interest rate hike on Thursday. According to Hong Kong Monetary Authority (HKMA) chief executive Eddie Yue Wai-man, this move may lead to a widening gap between market interest rates of the US dollar and the Hong Kong dollar.

This disparity could encourage more carry trades as investors switch to US dollar assets in search of higher yields, said Yue. As a result, the Hong Kong dollar may weaken against the US dollar.

However, Yue emphasized that despite higher borrowing costs, the city does not face a heightened bad-debt risk. This means that while interest rates may rise, banks are unlikely to struggle with a significant increase in non-performing loans.