Hedge funds return to HKD carry trade after May stop-outs
Widened interest rate differentials spur investors to re-enter positions, but risks remain
Dealers are seeing renewed hedge fund interest in the Hong Kong dollar carry trade due to the wide gap between Hong Kong and US rates, after many were stopped out on similar trades in early May.
“Hedge funds [and] fast money [accounts], which reduced some of their long USDHKD position in early May during the USD/Asia sell-off, are engaging in the trade again because of the attractive carry,” says John Luk, head of emerging markets trading for greater China at Crédit Agricole Corporate and
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