The Hong Kong dollar (HKD) has maintained its strength as uncertainties regarding US interest rates continue to influence currency markets. As observed in October, inflation rates in Hong Kong have eased slightly, contributing to the stability of the HKD. On October 16, Hong Kong Chief Executive John Lee announced initiatives aimed at solidifying the city’s position as a prominent international financial hub. Analysts note that while these measures could offer a short-term boost, significant recovery, particularly in home sales, may be contingent on further reductions in interest rates.
Despite the easing of draconian tourism restrictions, pessimism remains about the overall economic outlook. A recent report highlighted the resilience of the HKD during February, showing minimal movement against the USD, with a drop of less than 0.2%. Nevertheless, it approached a four-month low by month-end, staying stabilised below the 7.83 level in the USDHKD pair. Measures announced in early February to support the property market, such as scrapping additional stamp duties for non-permanent residents, were welcomed by the market. However, with inflation reported to drop to under 2% and a lacklustre GDP growth of just 0.4% in Q4, optimism regarding a domestic recovery remains fragile.
Current exchange rates reflect these market conditions. The HKD to USD is presently at 90-day lows, around 0.1274, which is only 0.5% below its three-month average. In contrast, against the Euro, the HKD trades at 0.1083, approximately 3.8% below its three-month average. The HKD has shown a similar trend against the British pound, registered at 0.093239 or 2.6% below its average. Furthermore, the HKD to JPY is tracking just below its three-month average, with stability within a 5% range.
Experts suggest that the HKD’s future performance will largely depend on the domestic economic recovery and the Federal Reserve's monetary stance. Until there are clearer signs of improvement, fluctuations in the HKD are expected, influenced by both local developments and international economic policies.
