Bill Ackman bets against the Hong Kong dollar. Sylvain Gabourey/Getty Images
Bill Ackman said Wednesday that he is betting against the Hong Kong dollar.
The billionaire investor thinks a rate hike by the Fed will break the currency’s peg to the dollar.
“The pin doesn’t matter to Hong Kong anymore and it’s only a matter of time before it crumbles.”
Bill Ackman is shorting the Hong Kong dollar in a bet that it will eventually break the peg against the US dollar as the Federal Reserve’s tightening campaign continues.
Billionaire investor: “We have a large notional short position against the Hong Kong dollar due to our holdings of put options.” tweeted on Wednesday. “The pin doesn’t matter to Hong Kong anymore and it’s only a matter of time before it crumbles.”
The value of Hong Kong’s currency has been fixed between 7.75 and 7.85 per dollar for nearly 40 years, but the peg has come under pressure as the Fed has aggressively raised interest rates to dampen US inflation.
Rising interest rates attract investors looking for higher returns, which pushes the dollar higher and leads to a decline in the value of every currency compared to it.
Economists call this a “reverse currency war,” with central bankers working with the Fed to raise interest rates to fight inflation and raise import costs.
Hong Kong’s monetary authority maintains a peg to the dollar by matching the Fed’s rate hikes, but that tightening will hurt growth at a time when zero-day COVID lockdowns and a debt crisis are already crippling the Chinese economy. to influence.
The country’s finance minister had previously warned investors not to bet against the currency peg.
“If you bet against the Hong Kong dollar, you are guaranteed to lose,” Paul Chan said at an investment summit earlier this month.
Read more: Decades of high inflation have led to a “reverse currency war” as the rising dollar leaves central banks scrambling to catch up
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