The Hong Kong dollar strengthened to the middle of its fixed trading range against the greenback for the first time since May, buoyed by stock inflows and a surge in local borrowing costs.

The city’s currency appreciated as much as 0.3 percent to 7.7991 per dollar on Tuesday. The Hong Kong Special Administrative Region’s interest-rate gap with the US has shrunk to the smallest since May, making bearish bets against the local currency via so-called carry trades less appealing.

A gauge of the Hong Kong dollar’s one-month borrowing costs surged for a third session Tuesday and has nearly tripled in a week. Chinese mainland investors have also piled into the city’s stocks in recent days.

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Today’s rally “sets the stage for further Hong Kong dollar strength,” said Ryan Lam, head of research at Shanghai Commercial Bank Ltd in Hong Kong. “But over the medium term, given the still positive carry, USD/HKD is likely to linger around the mid-point of the peg.”