Hong Kong dollar forward contracts jumped to a five month high on Tuesday, prompting fears for the Hong Kong dollar peg, according to a South China Morning Post report.
The news service revealed that, partly as a result of increased hedge fund interest in the contracts - which oblige one party to buy and another to sell a particular currency, equity, commodity, or financial instrument at a specified future date - the premium on one year forwards surged over the weekend, a development which many observers have attributed to growing fears over the outcome of the SARS epidemic.
However, JP Morgan regional currency strategist, James Malcom told the SCMP that there is no great cause for concern with regard to the safety of the dollar peg:
'The forwards are a measure of the risk premium on Hong Kong. It is very low in absolute terms but in relative terms it is picking up,' he observed.
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