HKMA and Trading USD/HKD

Hey folks! There are two comments I would like to make in concerns to the USD/HKD. The first is that it is October 20th, 2008. Look at the initial post ... October 21, 2007! Now I dont know about you ... though I dont believe this is coincidence. I wasnt aware what date I made this thread, I just have been keeping an eye on the HKD. Perhaps it is simply by chance and I am just tapping into theories that I shouldnt, but this is by far (considering the allowed range) the closest that this pair has gotten to the boundary the entire year. The spike that occurred in March of this year was too fast, I didnt catch it. This is more significant.

The second comment I would like to make is that I checked my own link from a year ago and the HKMA still has it as its policy to not allow the Hong Kong Dollar to go beyond the 7.7500 barrier. This means, just like last year, when we make a trade around this point we really do have a 3:1 R to R ratio. This is fairly good, clearly. If you have a positive, or at least near neutral swap on this pair ... TAKE THE TRADE! You dont get a government backing too often in this market, the HKMA is telling you what they will do.

Further, if you lose the trade that means that the boundary has been broken and the HKMA cant do anything about it. This means that you are in essence watching a MAJOR breakout occur. Not a technical breakout, you are watching a government financial institutional relinquish its strength. Could we then see the HKD move all the way to the CNY level? Theories are abound, no point in over speculation, though it will surely be a moneymaking opportunity either way.

The Trade

I use Oanda and the rates are pretty close to even. Spreads lately though with the broker are worth ____. I will purchase at 7.7575 (roughly) and set a SL for 7.7450 with TP of 7.8000.


Good trading,

Well, we are at the barrier, it is time for the HKMA now. I have not loaded up the boat as they would say, I just dont trust it. Sure I have an order in, though I am at about 10:1 leverage, not the 30:1 I should honestly do. I will regret not taking advantage of this situation, though with all the crazy things that have been ongoing I really wouldnt be surprised in the least if the HKMA had to just let this peg go. Here is an article found on Bloomberg.com

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By Bob Chen and Nipa Piboontanasawat
Oct. 23 (Bloomberg) -- The Hong Kong Monetary Authority is adding cash to the banking system to prevent the city's currency from strengthening beyond its fixed exchange rate.
``Hong Kong is really the safe haven in Asia,'' said Steven Chang, senior managing director of foreign-exchange trading at State Street Bank & Trust Co. in Hong Kong. ``Because regional markets are falling and we have a peg system, a lot of people are bringing money into Hong Kong. So the government buys U.S. dollars and sells Hong Kong dollars to satisfy demand.''
The city's central bank is injecting HK$3.877 billion ($500 million) into the financial system, it said today in a statement. The Hong Kong dollar has been pegged to its U.S. counterpart since 1983, and is allowed to trade 5 cents on either side of HK$7.8. It traded at HK$7.7535 per dollar as of 4:15 p.m. today, compared with HK$7.8120 two months ago.
``The Hong Kong dollar exchange rate has strengthened to near the strong side'' of the band, said HKMA spokesman Thomas Chan. ``These developments reflect increased demand for Hong Kong dollars.''
This is the fourth time the HKMA has added funds since September, after injecting HK$1.556 billion on Sept. 18, HK$3.9 billion on Sept. 25 and HK$4 billion on Oct. 20.

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I dont know how much they have to spend, but those injections before didnt do a thing. Either way, my second trade was put in at 7.7511 with the same TP and same SL. If the peg breaks (not trades below 7.7500, that happened last year for a week or so, more of a sharp and violent spike I would imagine down 200 or 300 pips) I am going to short this.

EDIT: http://www.bloomberg.com/apps/news?p...d=aioH7M4ZhpQc
Little perspective

anyone still trading this?

any one buying USDHKD?

Yes, I'm trading USDHKD, using max leverage near 7.75.

Quite boring though, sometimes it spikes up 10-20 pips, then I grab some (part) profit.

Any good ideas trading this pair?
Thanks.

Does anyone know why USDHKD is up this week?

I can't see any substantial developments in the situation with protests.

Thanks.