Pegged currencies and the strange quiet of USDHKD

[Fairman]

Pegged currencies and the strange quiet of USDHKD

Some currencies trade inside a band set by policy. The Hong Kong dollar floats inside a narrow range against the US dollar. Pairs like this look nothing like EURUSD on a chart.

Ranges are tiny. Days can pass with price moving a few pips. Then, when the rate touches the edge of the band, intervention appears and price snaps back. The pattern is mechanical and sometimes predictable.

Spreads are often wide relative to the daily range, which makes scalping expensive. A spread of 3 pips against a daily range of 20 turns most short-term strategies negative.

The interesting bit is the carry. Interest rate differences between a pegged currency and the dollar can create large swaps in either direction, and small forward points that drive the price inside the band.

A scalper tempted by the apparent calm should check the spread-to-range ratio before doing anything else. On a pegged pair, it is often the worst on the platform.

Which pairs on the platform have the worst ratio of spread to average daily range?