Hong Kong: On The Slow Lane To 7.85

USD/HKD is trending toward the 7.85 weak-side trigger, but elevated interest rate starting points and reduced carry incentives are slowing the process. The author anticipates the level will be reached closer to Q4 2026.

Key Takeaways

• 1.USD/HKD is trending towards the 7.85 weak-side Convertibility Undertaking, but the movement is expected to be slow.
• 2.Carry trades are less attractive compared to previous cycles due to a smaller interest rate gap and tighter local liquidity.
• 3.Weak local equity market sentiment and muted loan growth remove key structural sources of HKD demand.

Table of Contents

• Still a grind to the weak-side
• Historical USD/HKD weak-side CU episodes: key characteristics
• Carry, but less of it
• Weak equity market sentiment
• Real economy momentum not translating into loan growth
• USD/HKD to reach 7.85, but not so soon

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