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While the Hong Kong Dollar has continued to plunge towards breaking its peg band to the US dollar, overnight saw offshore Yuan plunge back to 1-month lows despite a PBOC rate-hike, as anxiety over US trade wars ripples through markets...

The Hong Kong Dollar is at its weakest to the dollar in 33 years, heading slowly but inexorably to test the dollar peg. It has never been so close to the weak end of its trading band against the greenback...

The currency is now 0.05 percent away from HK$7.85, a level that the city’s central bank is obliged to defend. The head of the Hong Kong Monetary Authority said the exchange rate is likely to fall to the low end of the band after the U.S. lifted borrowing costs overnight. Abundant liquidity in the Asian financial hub has meant interbank rates have lagged behind U.S. levels, making it lucrative for traders to sell the local dollar.

"This will put an end to the era of Hong Kong's extremely low interest rates for a long time," said Norman Chan Tak-lam, the HKMA chief executive.

"An increase in interest rate will help fight inflation in Hong Kong and benefit the economy as a whole."

"The Hong Kong dollar is now on the edge of the weak end of the peg," Chan said.

"Once the threshold is touched, HKMA will defend the peg by buying the Hong Kong dollar and selling the US dollar."

And China's offshore Yuan is tumbling despite a token 5bps hike by the PBOC...