Just Alvin
17 August 2024 04:03
The Hong Kong Monetary Authority (HKMA) discusses the HKD’s stability and economic challenges at its latest Currency Board Advisory Board meeting.
The Hong Kong Monetary Authority (HKMA) recently published the minutes of the meeting of the Advisory Board of the Exchange Fund Advisory Committee held on July 5, 2024. The discussion is has been focused on the stability of the Hong Kong dollar (HKD) and the broader economic landscape. , according to The Hong Kong Monetary Authority.
Currency Board Operations
During the review period from April 25 to June 25, 2024, the HKD traded in a narrow range of 7.7987 to 7.8294 against the US dollar (USD). The HKD exchange rate strengthened between late April and mid-May, driven by demand for dividend financing and vibrant stock market activity. Afterwards, it remains largely stable. HKD interbank rates continue to track USD rates, influenced by local supply and demand dynamics. The Aggregate Balance Sheet was stable at approximately HK$45 billion, and the Convertibility Commitments were not activated. No irregularities were reported in the use of the Discount Window, indicating smooth and orderly trading in the HKD exchange and interbank markets.
The Monetary Base increased to HK$1,917.51 ​​billion at the end of the review period. In accordance with the principles of the Currency Board, all changes in the Monetary Base have been fully compatible with changes in foreign reserves.
Risk and Vulnerability Monitoring
The Sub-Committee highlighted the asynchronous economic developments in the advanced economies (EA), noting the divergent policies of the central bank in response to the various trends of growth and inflation. While the US Federal Reserve maintained its position in June due to persistent inflation and robust job growth, several AE central banks began to lower rates. The Fed’s “higher for longer” guidance going forward may continue to strengthen the USD and impact the exchange rates of emerging market Asian economies. In addition, high global interest rates could challenge the asset valuation and credit quality of the private sector.
In mainland China, the economic recovery has been uneven, characterized by strong external trade, but weak domestic demand and sluggish property market activity. Market sentiment improved following a more supportive policy tone from the April Politburo meeting, which included pledges to reduce housing inventory. However, the outlook remains challenging due to the complex geo-strategic environment.
Hong Kong’s economic activities expanded in Q1 2024, led by a significant increase in merchandise exports and a recovery in the global technology cycle. The domestic economy is expected to recover at a moderate pace in 2024, although it faces risks and uncertainties related to the path of the US policy rate, the global economic outlook and geopolitical tensions. Despite active residential market transactions following policy relaxation at the end of February, market sentiment turned cautious in May amid new property launches at competitive prices and renewed uncertainty surrounding the rate path of US politics. The commercial real estate market, especially the office segment, has been under pressure.
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