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Wednesday, December 7, 2022

Billionaire investor Bill Ackman is shorting the Hong Kong dollar in a bet it will lose its peg to the dollar.

  • Bill Ackman said on Wednesday that he is betting against the Hong Kong dollar.
  • The billionaire investor believes that the Fed’s rate hikes will break the currency’s peg with the dollar.

Bill Ackman is shorting the Hong Kong dollar on a bet that it will eventually break its peg to the US dollar as the Federal Reserve’s tightening campaign continues.

“We have a large notional short position against the Hong Kong dollar through proprietary put options,” the billionaire investor said. tweeted on Wednesday. “The peg no longer makes sense for Hong Kong and it is only a matter of time before it is broken.”

Hong Kong’s currency has been pegged at between 7.75 and 7.85 to the dollar for nearly 40 years, but the peg has come under pressure as the Fed aggressively raises interest rates in a bid to rein in inflation. from USA

Rising interest rates tend to attract investors seeking higher yields, which pushes the dollar higher and causes the value of any currency measured against it to fall.

That has fueled what economists call a “reverse currency war,” in which central bankers raise interest rates at the same time as the Federal Reserve to fight inflation and rising import costs.

The Hong Kong Monetary Authority maintains a peg to the dollar by matching the Federal Reserve’s rate hikes, but that adjustment will hurt growth at a time when zero-COVID lockdowns and a debt crisis are already battering the economy. from China.

The country’s finance minister previously warned investors not to bet against the currency peg.

“If you bet against the Hong Kong dollar, you’re bound to lose,” Paul Chan said at an investment summit earlier this month.

Read more: Decades of high inflation have sparked a “reverse currency war” as a rising dollar leaves central banks scrambling to catch up.

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