Hong Kong’s currency regime is coming under mounting strain as the US Federal Reserve steps up the pace of monetary tightening, threatening to set off an unpredictable chain of events in the world’s most over-stretched financial system.

The enclave’s US dollar peg – usually rock solid – has suddenly become the focus of global markets after the currency fell last week to its lowest level since the current trading band was established in 2005. Analysts say the authorities may soon be compelled to defend the exchange rate, with escalating complications.