Hong Kong Dollar Defense to Drain Billions as Economy Sputters

(Bloomberg) — Hong Kong’s beleaguered economy faces the prospect of soaring borrowing costs, with the city’s de facto central bank expected to drain large amounts of liquidity as it defends a dollar peg.

Three-month money market rates may jump as much as 190 basis points by the end of the year, according to a survey of five analysts. The Hong Kong Monetary Authority (HKMA) is seen spending at least $16 billion defending the city’s currency peg as the dollar surges on U.S. rate hikes.