Hong Kong Dollar Drops Most Since '03 as Bets Mount on Peg's End

14/01/2016 13:32 AST

The Hong Kong dollar sank by the most in more than decade and speculation mounted in the options market that the city’s 32-year-old currency peg will end as investors lose confidence in Chinese assets.

The local dollar dropped as much as 0.21 percent -- its biggest intra-day loss since October 2003 -- to a four-year low of HK$7.7761 versus the U.S. dollar. Options prices indicate there’s a 27 percent chance the currency will have weakened beyond its permitted trading range of HK$7.75-HK$7.85 by the end of this year, up from 9.5 percent on Dec. 31, Bloomberg data show. The Hang Seng Index of shares closed down 0.6 percent and the offshore yuan was 0.6 percent weaker as of 5:17 p.m. local time, having slipped to a five-year low last week.

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