USD/HKD Outlook:
Bullish, as the rate is near recent highs and supported by investor repositioning away from USD assets.
Key drivers:
• Rate gap: The Federal Reserve's decision to hold interest rates steady leaves the USD at a disadvantage compared to the HKD, where the Hong Kong Monetary Authority is actively maintaining its currency peg.
• Risk/commodities: Decreased interest in U.S. assets amid geopolitical tensions has weakened the USD, potentially increasing demand for HKD.
• One macro factor: The ongoing trend of de-dollarization is pressuring the USD as countries expand local currency trade, impacting its global status.
Range:
USD/HKD is likely to test extremes, given its current position near recent highs.
What could change it:
• Upside risk: A positive shift in U.S. economic data, such as stronger retail sales, could bolster the USD.
• Downside risk: Additional interventions by the HKMA to support the HKD could exert downward pressure on the USD.
