Higher interest rates coming for Hong Kong, says Natixis

HONG KONG – Natixis believes the direction of interest rates in Hong Kong will be up, and that there can be no further delay after the persistent weakness of the Hong Kong dollar finally prompted the Hong Kong Monetary Authority (HKMA) to intervene.

“At first, the market managed to absorb the sell order itself and, the HKMA later intervened with HK$,258 million (US$415 million, equivalent to barely 0.1% of foreign reserves,” Natixis says.

“We argue that this intervention could set the stage for the beginning of a new monetary cycle in Hong Kong after a protracted disregard of the FED monetary policy,” it adds.

“With HKMA intervention, the limit to HKD weakness is not only on paper but in reality.

 “Let aside the legal obligation, HKMA’s intervention was needed to keep the HKD within our estimated credibility band.”  www.natixis.com (ATI).