Hong Kong Monetary Authority: The trading of Hong Kong dollar foreign exchange and interbank market continues to be smooth and orderly

According to the report released by the Hong Kong Monetary Authority, during the reporting period (from December 25, 2024, to April 16, 2025), the Hong Kong dollar fluctuated between 7.7555 and 7.7927 against the US dollar. As liquidity constraints eased at the end of 2024 and global markets reacted to the US's announced tariff policies, the Hong Kong dollar slightly weakened in early January 2025. However, in mid-February 2025, driven by progress made in the field of artificial intelligence in mainland China and net inflows of southbound funds through the Stock Connect, the Hong Kong stock market performed strongly, supporting a strengthening of the Hong Kong dollar.

In early April, in the face of further US tariff increases, long positions in US dollars were closed due to risk aversion, coupled with continued inflows of southbound funds, leading to further strengthening of the Hong Kong dollar. The Hong Kong Interbank Offered Rate continued to follow the trend of US dollar interest rates, while short-term rates were also influenced by local supply and demand conditions. The short-term Hong Kong interbank offered rate tightened briefly as the year-end approached but softened later as funding demand decreased. The currency peg was not triggered during the reporting period, with the summary balance remaining stable at around HKD 45 billion; there were no unusual circumstances regarding the use of the discount window. Overall, trading in the Hong Kong dollar foreign exchange and interbank markets continued to be smooth and orderly.

The Hong Kong Monetary Authority stated that with the US imposing reciprocal tariffs, the downside risks to Hong Kong's economic growth outlook have increased. However, several factors, including policies to promote economic growth in mainland China, progress in the field of artificial intelligence, market expectations for US interest rate cuts, and the continued recovery of inbound tourism, have helped to mitigate the related impacts to some extent. On the other hand, as the Hong Kong government adjusted the stamp duty on lower-priced properties, transaction volumes in the residential property market increased in March, but market sentiment turned cautious in April due to fluctuations in the global financial market. The commercial property market remains weak, especially in office properties.

The Hong Kong Monetary Authority mentioned that as the US announced reciprocal tariffs that exceeded market expectations, the risks of a slowdown in global economic growth have risen. Global financial markets have shown volatility but continue to operate smoothly, with no signs of widespread financing pressure. Although the delayed implementation of reciprocal tariffs has provided some relief to export-dependent Asian economies facing higher tax rates, the potential for tariffs to be implemented in the future still poses a significant obstacle to economic growth.

Entering 2025, signs of economic recovery have emerged in mainland China, and the atmosphere in the stock market has also improved. In particular, at the "Two Sessions" held in March, authorities conveyed a strong signal to stabilize growth, including prioritizing consumption and strengthening fiscal support. The Hong Kong Monetary Authority expects mainland China to focus more on boosting consumption