Hong Kong Rates May Spike as Funds Depart, Morgan Stanley Says
- Bank warns city’s currency could test weak end of trading band
- Concern is investors pull funds as demonstrations continue
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Hong Kong’s interbank interest rates will turn increasingly volatile as investors continue to yank cash from the city’s financial markets, according to Morgan Stanley.
The Hong Kong dollar may test the weak end of its trading band with the greenback if the pace of outflows increases, Morgan Stanley strategists including Chun Him Cheung wrote in a report dated Aug. 19. That would force the city’s de facto central bank to defend the peg, squeezing liquidity and triggering a spike in local borrowing costs, they wrote.