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USD/HKD Edges Up From Recent Lows, Q2 GDP Out Later

HKD

USD/HKD spot has drifted slightly higher today, the pair back above the 7.8000 level. Recent lows rest around the 7.7950 level, with last week's move sub this level the first time the pair had breached the mid-point of the HKMA peg band this year. Still, we remain some distance away from early December 2022 lows near 7.7600.

  • Outright forward rates remain sub spot levels. The 12 month sitting at 7.7670, with support for the pair evident on 7.7600 breaches in recent months. The market may speculate that with the Fed tightening drawing closer to an end, HKD will spend more time on the firmer side of the peg band as we progress through H2.
  • 3 month US-HK rate differentials are in negative territory, last around -34bps, which compares to late 2022 highs near +70bps, but is well above earlier 2023 lows, -175bps, which came around the height of banking concerns in the US.
  • HKMA Executive Arthur Yuen stated that higher rates may prevail for some time, in a warning to local investors late last week. He also stated HKD was receiving support from dividend related flows.
  • Later today, Q2 GDP is out. The market expects y/y growth at 3.5%, versus 2.7% prior. Money supply and June Budget Balance figures are also due out some time today.
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