Hong Kong dollar slips as loose liquidity revs up carry trades
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The Hong Kong dollar has weakened to its lowest level since August due to excess liquidity in the banking system, encouraging carry trades against the currency. Investors are borrowing Hong Kong dollars at low rates to invest in the higher-yielding US dollar, taking advantage of the widest interest-rate gap since November. Demand for the Hong Kong dollar has decreased as southbound investment from mainland China slows. The currency is currently around 7.81 per US dollar, with analysts predicting potential further weakening but resistance at the 7.82 level.
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