Hong Kong Diversifies Amid Dollar Volatility

The Hong Kong Monetary Authority is making strategic changes in its portfolio by reducing the duration of U.S. Treasury holdings. Chief Executive Eddie Yue announced the move amidst growing volatility in dollar bonds, emphasizing a shift towards diversifying into other currencies and assets.

Yue explained that longer-duration bonds have been more impacted during recent market upheavals, prompting the HKMA to adopt a more defensive posture in its investment strategies. This adjustment is part of a broader effort to hedge against factors such as U.S. trade policies and global market reactions.

Amidst these changes, the Hong Kong dollar has shown strength against its U.S. counterpart. This appreciation has triggered the HKMA's currency interventions as capital inflows, driven by Chinese investors and strong IPO activity, continue to uplift demand for the local currency. The monetary authority aims to balance diversification while maintaining robust U.S. dollar reserves to uphold its currency peg.

(With inputs from agencies.)