HKMA’s Yue: Weak Hong Kong Dollar Reflects Rate Gap, Sliding Stock-Related Demand

Yue's diagnosis separates cyclical from structural drivers, which matters because only one of them is self-correcting. Rate-gap carry trades tend to unwind when the gap narrows, but sliding stock-related demand points to softer local asset-market activity, a slower-moving drag. The proximity to the weak-side convertibility undertaking is the level worth watching: it determines whether the HKMA's automatic intervention mechanism is tested, and whether the aggregate balance — and therefore local funding costs — comes under pressure.