HONG KONG, March 23 (Reuters) - The Hong Kong dollar fell to a new 33-year low on Friday, inching closer to the lower end of the monetary authority’s targeted trading band as the interest rate gap between U.S. dollar rates and Hong Kong counterpart widened further.
Because the former British colony pegs its currency to the greenback, its money market rates mirror that of its U.S. counterparts.
But the gap between the two has widened to the highest since the 2008 financial crisis, as the U.S. central bank is in the midst of raising interest rates, but the Hong Kong money market remains awash with liquidity thanks to equity market inflows and remnants of money printing from global central banks.
In early Friday trade, the Hong Kong dollar fell to a new 33-year of 7.8484 per dollar.
The Hong Kong Monetary Authority, the city’s de facto central bank, has pegged the local currency at 7.8 to the U.S. dollar since 1983, but it allows it to trade between 7.75 and 7.85. (Reporting by Donny Kwok; Editing by Eric Meijer)