09:07 AM EDT, 06/12/2025 (MT Newswires) -- The USD/HKD has surged from 7.75 to 7.849 in just one month, and it is likely to reach the weak end of the band -- 7.85 -- "soon," said Societe Generale.

The pace of the Hong Kong dollar (HKD) depreciation is concerning, prompting market participants to question whether the HKD-USD peg system will hold, wrote the bank in a note to clients.

SocGen outlines three of the speculated-upon alternatives to the peg system: 1) a trade-weighted exchange rate range; 2) pegging the HKD to China's RMB; and 3) further widening of the HKD-USD peg band.

However, the bank doesn't believe any of these alternatives are likely to materialize. The Hong Kong Monetary Authority (HKMA) retains a strong capacity to defend the peg and will intervene when USD/HKD hits 7.85.

As a consequence, the pace and magnitude of HKMA intervention via money market withdrawal and EFB/EFN net issuance will be moderate. SocGen recommends focusing on more tactical and technical trades in the HKD foreign exchange and rates space.