Hong Kong dollar next year, the strength of the four key Hong Kong dollar dismantling 1-month liquidation forced 1.16 PCT rose to 9-year high

With the end of the year approaching, the external demand for the U.S. dollar has risen, dragging the Hong Kong dollar further weaker. However, the analysis of the treasury sector shows that although it is widely expected that the Hong Kong dollar will continue to move toward the weaker side with the widening spread between Hong Kong and the United States, it will not necessarily fall below the level of 7.83 in the near term.

Taking into account the market’s opinions, the exchange rate of Hong Kong dollar will continue to be weak in the next year. When it comes to the level of weak exchange, there are four major factors: (1) whether the spread between Hong Kong and the United States will be further widened; (2) (C) whether the tax reform in the United States will attract capital to flow backwards; (d) whether the HKMA will hand out the liquidity of the market again and lift Hong Kong interest rates to Hong Kong exchange rates.

Hong Kong dollar interest rates shrink Hong Kong dollar asset attraction

Affected by the interest rate difference between Hong Kong and the United States, Hong Kong exchange rate gradually weakened under the hedging disc. In view of the abundant balance of the local banking system, Hong Kong interest rates have been at a level close to zero for some years. In contrast, the interest rate hike in the U.S. dollar has been driven up by interest rate hikes. As a result, the interest rate difference between China and Hong Kong expanded to over 0.8% this year, attracting institutional investors and banks to make Low risk arbitrage.

As one month of local moneys broke up by about 0.44% in one month, the gap between Hong Kong and the United States has gradually narrowed to 0.37%. As a result, the currency exchange rate swung between 7.81 and 7.82 levels. In other words, the market’s anticipation of the rate hike in the United States and the trend of dollar interest rate cuts will be one of the key factors that will widen the gap between Hong Kong and the United States.

On the other hand, the return on investment in Hong Kong dollar assets this year is good, attracting a lot of hot money to flow into the local market. It is generally expected by the treasury community that unless there is any major adverse impact on the Hong Kong stock market and the property market, the funds sought after by the high returns will not be expelled by shortfalls in the short run. The U.S. Congress passed the U.S. tax reform package recently. The focus of the market is whether the funds will be attracted back to the U.S. dollar zone. If the funds are switched from the Hong Kong dollar to the U.S. dollar, it is bound to exacerbate the pressure of the Hong Kong dollar to go capital and depreciate.

Under the joint exchange system, the interest rate difference between Hong Kong and the United States will eventually result in a rise in interest rates as a result of the settlement of the pledged weakness by the exchange. However, in fact, the HKMA can still influence the depreciation of Hong Kong exchange in disguise through the additional issuance of Exchange Fund Bills (ROs) and the tightening of liquidity in the market.