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Straits Times
7 days ago
- Business
- Straits Times
Hong Kong intervenes to defend US dollar peg as local currency drops
HONG KONG – Hong Kong's de-facto central bank spent more than a billion dollars propping up the city's exchange rate, as it sought to defend a currency peg that has been strained by volatility in the greenback. The Hong Kong Monetary Authority (HKMA) took out HK$9.42 billion (S$1.5 billion) of the city's currency from circulation after the exchange rate touched the weak end of its US dollar peg. In earlier weeks, the monetary authority had injected liquidity into the financial system to rein in gains in the local exchange rate as the US currency declined. The currency rose as high as 7.8469 per US dollar in the morning session in Asia on June 26, before paring the gain to trade around 7.8493. In addition to pushing the currency back into its permitted trading range of 7.75-7.85 per greenback, the HKMA's latest move will also make bearish bets more costly. It does this by draining liquidity from the financial system and driving up borrowing costs. The one-month Hibor rate rose to 0.97 per cent after the HKMA's intervention, the highest level since May 19. The gap between one-month US and Hong Kong rates stands at well over 300 basis points. When Hong Kong dollar's funding costs are significantly lower than those in the greenback, traders tend to borrow the city's currency and sell it against its higher-yielding US counterpart to earn the interest-rate difference. That's made it the world's most rewarding carry trade over the past month by one measure. The intervention follows a rollercoaster ride for the Hong Kong dollar that has seen it swing between both ends of its trading range as authorities sought to protect the currency peg. The volatility has intensified debate about the sustainability of the fixed exchange rate, even though there are no signs that a change is imminent. The HKMA is signalling that funding for carry trades is going to be more expensive and USD/HKD will not rise much further, said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney. 'For markets, the big question is: do you believe the peg will be protected? For now, authorities are showing that they are very much willing to defend it.' When asked about the prospect of further intervention, the HKMA referred to its website which says the monetary authority is committed to buying local dollars if the currency hits the weak end of the band. The HKMA's predicament stands in contrast to the dilemma faced by most other Asian central banks, which are trying to cool their currencies' gains as the dollar declines. It was just in early May when the Hong Kong dollar advanced to 7.75 per dollar as the greenback weakened, prompting the HKMA to step in to check its gains. Authorities pumped in US$16.7 billion (S$21.4 billion) worth of local dollars into the financial system, driving it to the weaker end of the band. The HKMA's move to intervene at both ends of the trading range in the same year is 'a first since the city's de facto central bank reformed the peg system into a band in May 2005,' Stephen Chiu, chief Asia FX and rates strategist at Bloomberg Intelligence, wrote in a note. 'If the current, more frequent touching of the band becomes the new norm, reduced stability in the Hibor might not be constructive for businesses operating in the city – particularly the property sector,' Mr Chiu wrote. 'Subsequently, it may be natural for authorities to study whether the peg parameters should be modified – for example, the band width and even the peg target.' Hong Kong will maintain its currency's peg to the US dollar as it is a key success factor, Chief Executive John Lee Ka-chiu told local media in early June, after a bout of volatility fuelled speculation about alternatives to a dollar peg. The latest intervention will reduce the city's aggregate balance, a closely-watched component of its monetary base and gauge of interbank liquidity to HK$164 billion, the HKMA said. Hong Kong also has $431 billion in foreign currency reserves, according to the latest data for May. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
Free Malaysia Today
25-06-2025
- Business
- Free Malaysia Today
Dollar slumps in broad risk rally after Trump announces Israel-Iran ceasefire
Against a basket of currencies, the US dollar was slightly lower at 98.12, extending its more than 0.5% decline in the previous session. (Reuters pic) SINGAPORE : The US dollar fell today while its Australian and New Zealand counterparts rose after President Donald Trump announced a ceasefire between Israel and Iran, in news that sent investors cheering and sparked a risk rally across markets. Trump announced a complete ceasefire between Israel and Iran, potentially ending the 12-day conflict that led millions of people to flee Tehran and prompted fears of further escalation in the war-torn region. However, there was no confirmation from Israel, and the Israeli military said Iran launched waves of missiles today just hours after the announcement. Trump later said the ceasefire 'is now in effect' and urged both countries to not violate it. The risk-sensitive Aussie got a lift and last traded 0.5% higher at US$0.6493 as did the kiwi, which rose 0.55% to US$0.6009. Israel's shekel rallied sharply too, jumping 1% against the dollar to its strongest level since February 2023. 'It's obviously positive news for risk sentiment,' said Rodrigo Catril, senior currency strategist at National Australia Bank, of the announced ceasefire. 'We need to obviously have a bit more detail in terms of exactly what all this means… I suppose it will be the conditions of the ceasefire, and what are the conditions for a more longer-lasting peace deal,' Catril said. The dollar, which last week drew support from safe-haven demand, fell broadly in the wake of the news. Against the yen, the greenback was down 0.47% at 145.45. The euro rose 0.23% to US$1.1605 and sterling advanced 0.27% to US$1.3564. The yen and euro benefited from a slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the US is a net exporter. Adding to headwinds for the dollar were dovish comments from Federal Reserve (Fed) policymaker Michelle Bowman, who said the US central bank should consider interest rate cuts soon. Bowman's openness to cutting rates soon is supported by Fed governor Christopher Waller, who said in a television interview last week that he would also consider a rate cut at next month's meeting. Against a basket of currencies, the dollar was slightly lower at 98.12, extending its more than 0.5% decline in the previous session. Fed Chair Jerome Powell is due to testify before the US Congress today and tomorrow, where focus will be on the outlook for US rates. 'There appears to be increasing division among the ranks of the Fed board ahead of Fed chair Powell's testimony,' said Tony Sycamore, a market analyst at IG. 'The chance of a July rate cut… is still underpriced. I think it should be higher than that,' Sycamore. Markets are now pricing in close to a 23% chance the Fed could ease rates in July, up from 14.5% a day ago, according to the CME FedWatch tool. In cryptocurrencies, Bitcoin rose more than 1% to US$105,155.52, while Ether jumped 2.7% to US$2,412.54, in a reflection of the positive risk sentiment.
Malay Mail
24-06-2025
- Business
- Malay Mail
Dollar slumps in broad risk rally after Trump announces Israel-Iran ceasefire
SINGAPORE, June 24 — The US dollar fell today while its Australian and New Zealand counterparts rose after President Donald Trump announced a ceasefire between Israel and Iran, in news that sent investors cheering and sparked a risk rally across markets. Trump announced a complete ceasefire between Israel and Iran, potentially ending the 12-day conflict that led millions of people to flee Tehran and prompted fears of further escalation in the war-torn region. But there was no confirmation from Israel, and the Israeli military said Iran launched waves of missiles today just hours after the announcement. Trump later said the ceasefire 'is now in effect' and urged both countries to not violate it. The risk-sensitive Aussie got a lift and last traded 0.5 per cent higher at US$0.6493 (RM2.76) as did the kiwi, which rose 0.55 per cent to US$0.6009. Israel's shekel rallied sharply too, jumping 1 per cent against the dollar to its strongest level since February 2023. 'It's obviously positive news for risk sentiment,' said Rodrigo Catril, senior currency strategist at National Australia Bank, of the announced ceasefire. 'We need to obviously have a bit more detail in terms of exactly what all this means... I suppose it will be the conditions of the ceasefire, and what are the conditions for a more longer-lasting peace deal.' The dollar, which last week drew support from safe-haven demand, fell broadly in the wake of the news. Against the yen, the greenback was down 0.47 per cent at 145.45 . The euro rose 0.23 per cent to US$1.1605 and sterling advanced 0.27 per cent to US$1.3564. The yen and euro benefited from a slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter. Adding to headwinds for the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the US central bank should consider interest rate cuts soon. Bowman's openness to cutting rates soon is supported by Fed Governor Christopher Waller, who said in a television interview last week that he would also consider a rate cut at next month's meeting. Against a basket of currencies, the dollar was slightly lower at 98.12, extending its more than 0.5 per cent decline in the previous session. Fed Chair Jerome Powell is due to testify before the US Congress today and tomorrow, where focus will be on the outlook for US rates. 'There appears to be increasing division among the ranks of the Fed board ahead of Fed Chair Powell's testimony,' said Tony Sycamore, a market analyst at IG. 'The chance of a July rate cut... is still underpriced. I think it should be higher than that.' Markets are now pricing in close to a 23 per cent chance the Fed could ease rates in July, up from 14.5 per cent a day ago, according to the CME FedWatch tool. In cryptocurrencies, bitcoin rose more than 1 per cent to US$105,155.52, while ether jumped 2.7 per cent to US$2,412.54, in a reflection of the positive risk sentiment. — Reuters per cent
RNZ News
24-06-2025
- Business
- RNZ News
NZ dollar rises, US slips in broad risk rally after Trump announces Israel-Iran ceasefire
By Rae Wee for Reuters The US dollar, which last week drew support from safe-haven demand, fell broadly in the wake of the news of a ceasefire. File photo. Photo: 123rf The dollar fell while the Australian and NZ dollars rose after US President Donald Trump announced a ceasefire between Israel and Iran, in news that sent investors cheering and sparked a risk rally across markets. Trump announced a complete ceasefire between Israel and Iran, potentially ending the 12-day conflict that saw millions flee Tehran and prompted fears of further escalation in the war-torn region. There was no immediate comment yet from Israel. While an Iranian official earlier confirmed that Tehran had agreed to a ceasefire, the country's foreign minister said there would be no cessation of hostilities unless Israel stopped its attacks. The risk-sensitive Aussie got a lift and last traded 0.3 percent higher at $0.6480 as did the Kiwi, which rose 0.3 percent to $0.5994. Israel's shekel rallied sharply too, as it jumped 1 percent against the dollar to its strongest level since February 2023. "It's obviously positive news for risk sentiment," said Rodrigo Catril, senior currency strategist at National Australia Bank. "We need to obviously have a bit more detail in terms of exactly what all this means... I suppose it will be the conditions of the ceasefire, and what are the conditions for a more longer-lasting peace deal." The dollar, which last week drew support from safe-haven demand, fell broadly in the wake of the news. Against the yen, the greenback was down 0.37 percent at 145.60. The euro rose 0.12 percent to $1.1592 and sterling advanced 0.11 percent to $1.3541. The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter. Trump's comments on his Truth Social site came after Iran launched a missile attack on an American air base in Qatar on Monday that caused no injuries, in a move which he dismissed as a "weak response" to US attacks. Adding to headwinds for the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the US central bank should consider interest rate cuts soon. Bowman's openness to cutting rates soon is supported by Fed Governor Christopher Waller, who said in a television interview last week he'd also consider a rate cut at next month's meeting. Against a basket of currencies, the dollar was little changed at 98.23, having declined more than 0.5 percent in the previous session. "There appears to be increasing division among the ranks of the Fed board ahead of Fed Chair Powell's testimony," said Tony Sycamore, a market analyst at IG. "The chance of a July rate cut... is still underpriced. I think it should be higher than that." Markets are now pricing in more than a 20 percent chance the Fed could ease rates in July, up from 14.5 percent a day ago, according to the CME FedWatch tool. Fed Chair Jerome Powell is due to testify before the U.S. Congress on Tuesday and Wednesday, where focus will be on the outlook for U.S. rates. In cryptocurrencies, bitcoin rose more than 1 percent to $104,939.26, while ether jumped 2.1 percent to $2,397.65, in a reflection of the positive risk sentiment. - Reuters
CNBC
18-06-2025
- Business
- CNBC
Dollar muted as investors watch Israel-Iran conflict ahead of Fed decision
The U.S. dollar eased against the yen and Swiss franc on Wednesday, as fighting between Israel and Iran prompted investors to scoop up safe-haven assets, while a Federal Reserve decision on interest rates due later kept volatility subdued. Israel has pounded Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic. The U.S. military is also bolstering its presence in the region, Reuters reported, sparking speculation of U.S. intervention that investors fear could widen the conflict in an area replete with energy resources, supply chains and infrastructure. The dollar has resumed its role as a safe haven, having gained around 1% against both the Japanese yen and Swiss franc since last Thursday. On Wednesday, the U.S. currency took a breather, edging fractionally lower against the yen and the franc and more noticeably so against the euro and the pound. "The dollar is still a safe haven because of its depth and liquidity, so, yes the structural forces are diluting the dollar safe-haven activities, but they're not eroding them completely," said currency strategist Rodrigo Catril at National Australia Bank. "But in a scenario of big risk aversion, the dollar will still gain support but maybe not to the same extent it has managed in the past." Against a basket of six other major currencies, the dollar is still down around 8% so far this year, as confidence in the U.S. economy and the reliability of President Donald Trump'sadministration as a trading and diplomatic partner has faded. With the Federal Reserve's decision on interest rates just hours away and markets closed on Thursday for the Juneteenth federal holiday, activity in currencies was muted. Against the yen , the dollar fell 0.2% to 144.975 tilted into the red against the franc to 0.81665 francs. Traders expect the central bank to leave borrowing costs unchanged and will closely parse what Chair Jerome Powell says about the outlook for growth and inflation. Uncertainty was already running high and recent data have started to show the impact of Trump's erratic approach to trade and tariffs. The escalation in tensions in the Middle East, and the surge in crude oil prices to about $75 a barrel, have further complicated matters for policymakers. Trump has repeatedly called for Powell to cut rates, accusing him of being too slow to lower borrowing costs. In the current environment, the Fed Chair is unlikely to signal when a cut might happen, according to strategists at MUFG. "The takeaway this evening may be some modest increase in expectations of rate cuts from September onwards. The appetite to sell the dollar though will likely be muted for now until there is a clearer outlook on the Israel/Iran conflict over the coming days," MUFG head of research for EMEA Derek Halpenny said. Weekly initial jobless claims data is due later, while on the macro front, the Swedish central bank cut rates as expected leaving the crown a touch weaker against the euro , which rose 0.3% to 10.998 crowns. On Thursday, the Swiss National Bank, the Bank of England and the Norges Bank will deliver their respective rate decisions. The pound rose 0.26% to $1.346 after data showed inflation cooled no more than expected to an annual rate of 3.4% in May, ahead of the BoE decision. The euro was also up 0.3% at $1.1514. In the background, an area of frustration for investors was a Group of Seven meeting in Canada that yielded little on the tariff front ahead of Trump's early-July deadline for additional levies.
