Hong Kong Diversifies Amid U.S. Treasury Volatility

The Hong Kong Monetary Authority is shifting its investment strategy from U.S. treasuries to diversify into other assets and currencies due to volatility. This move comes as the Hong Kong dollar strengthens amidst concerns over U.S. policies affecting global financial markets and the credibility of the dollar.

The Hong Kong Monetary Authority (HKMA) is adjusting its strategy by reducing its holdings in U.S. treasuries, as confirmed by chief Eddie Yue on Tuesday. Instead, the HKMA is diversifying its investments into various currencies and assets, reacting to growing volatility in dollar bonds.

In recent weeks, the Hong Kong dollar has gained strength, aligning with other Asian currencies as investors pivot towards local currencies. This shift followed U.S. President Donald Trump's tariff policies, which raised recession alarms, destabilized markets, and challenged the credibility of the U.S. dollar.

"We've been cutting down the duration of our U.S. Treasury holdings due to heightened market volatility," Yue mentioned during a conference. Longer-duration bonds have suffered more during this turmoil. Thus, the HKMA aims to strategically diversify its portfolio to better handle current financial uncertainties.

(With inputs from agencies.)