A surge in Hong Kong interest rates is upending what was the world’s best carry trade earlier this year, after local authorities engineered a cash squeeze to ease pressure on the city’s decades-old currency peg.
The strategy of borrowing Hong Kong’s currency cheaply to invest in the higher-yielding US dollar has become less profitable after the benchmark one-month Hong Kong Interbank Offered Rate, or Hibor, roughly tripled in the five sessions before Thursday.