Hong Kong Plows $1.2 Billion Into Defending Currency to Little Effect in Q2-2018

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Hong Kong Plows $1.2 Billion USD Into Defending Currency to Little Effect Q2-2018

Analysis: Very interesting. Due to HKD being locked onto USD, the cost of the lock is the continous purchase of USD to balance out local currency. Hong kong hasn't had to defend the HKD currency in awhile due to an over abundance of USD in the economy. Once Trump came into the picture , the HKD band has been tested meaning, to continue maintaining low interest rates and parity with USD, Hongkong Gov. will have to continue purchasing USD. The Hong kong governemnt has 17.6 billion USD in yearly trade surplus and 216 billion USD in total financial reserves (Mar. 2018).

Conclusion:  If the currency lock is broken, expect interest rates to go up and real estate property prices to go down. Hong kong property prices have been extraordinary float-y. USD/HKD can be its Achilles heel.

 

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