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Worried Hong Kong Residents Are Moving Money Out as Protests Escalate

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The local currency has weakened rapidly since early July, a move analysts attribute partly to outflows.

Steven Russolillo, Joanne Chiu and Eli Binder report: Money is leaking out of Hong Kong as months of protests raise concerns about the city’s future.

The local currency has weakened rapidly since early July, a move analysts attribute partly to outflows. Some businesses say they are seeing money move abroad, and several individuals who spoke to The Wall Street Journal said they have either swapped money into other currencies or are considering doing so.

Sarah Fairhurst, a 52-year-old partner at the Lantau Group, an economic consulting firm, said she transferred 200,000 Hong Kong dollars (about $25,500) into British pounds last week because of concerns about the protests.

“It’s very unsettling here,” said Ms. Fairhurst, who has lived in Hong Kong for 12 years. She said seeing videos of police using tear gas near her office have made her particularly nervous. “I don’t know what’s going to happen, but I know that I don’t want my money trapped here.”

Retail, tourism and business confidence have all suffered, and the city’s stock and property markets are under pressure. The extradition bill that sparked the unrest, and the months of clashes that have followed, have together raised questions about the city’s future as one of the world’s largest international financial hubs, and how much autonomy it can maintain in its dealings with Beijing.

Ken Cheung, chief Asian foreign-exchange strategist at Mizuho Bank, said the weakening of the Hong Kong dollar against the U.S. currency, despite their respective interest rates, was a worrying sign of capital outflows. He said a falling stock market could indicate some people were shifting money abroad.

The Hong Kong dollar has been pegged to its U.S. equivalent since 1983. The de facto central bank, the Hong Kong Monetary Authority, lets the U.S. dollar trade between 7.75 and 7.85 Hong Kong dollars, and buys or sells greenbacks to keep the currency pair within those bounds.

The Hong Kong dollar traded at 7.8399 Friday, near the weak end of the band, even though interbank borrowing rates in Hong Kong are higher than their U.S. counterparts, which would usually help buoy the currency … (read more)

Source: WSJ

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