HONG KONG: Bets are growing of a possible scrapping of a historic peg of the Hong Kong dollar against the greenback, after China’s surprise devaluation of the yuan this month sent financial markets into a tailspin and stoked fears of a global currency war.

One month implied volatility on the Hong Kong dollar — an indicator of expected price swings — jumped to 2.23 on Monday, the highest level in a decade. It was much higher than one on August 11 when the People’s Bank of China weakened the yuan by two per cent.