Barclays: Approximately 10% of the long positions in USD/HKD by hedge funds have been closed out.

Barclays said that hedge funds have accumulated $42 billion in long positions in USD/HKD over the past two years, with approximately 8% to 10% of these positions being closed out in the past week due to market volatility and intervention by the Hong Kong Monetary Authority. Strategist Lemon Zhang and his colleagues wrote in a report to clients that going long on USD/HKD has been one of the most popular arbitrage trades in recent years. IPOs and dividend payments have led to increased demand for the Hong Kong dollar; dividend payments from April to June are expected to reach $36.1 billion, nearly twice the average level in previous years, but these driving factors may weaken in the coming weeks as Hong Kong is expected to maintain its pegged exchange rate system.