- HKD Biggest Drop
- Hong Kong Beijing Standoff
- Slowing Chinese Economy
The Hong Kong Dollar registered its biggest drop in six weeks as escalating tensions between the autonomous region and Beijing triggered a selloff spree in the forex market. Bearishness in the HKD is already having a negative impact on elevated costs triggered by the COVID-19 fallout.
Reports that President Trump is considering revoking Hong Kong’s special trade status should continue to weigh in on the Hong Kong Dollar against a strengthened dollar as a safe-haven. Hong Kong is the subject of a bitter standoff between the U.S and China over a controversial security law.
China is pushing through with the security law as it looks to maintain its full control of the semiautonomous region. The push has, however, triggered a wave of protests that had come to a halt in the wake of the coronavirus pandemic.
The U.S revoking Hong Kong special trade Status is the latest tailwind that should continue to weigh in on the HKD strength. There is already fear in the market, seen by capital fleeing the market in almost all segments.
Chinese Yuan Weakness
The USD/CNY, on the other hand, continues to firm near two-month lows of 7.1465 amidst escalating tensions with the U.S. A strengthened dollar in the wake of soaring tension has continued to take a toll on the pair in the forex market.
While easing the COVID-19 pandemic has helped fuel some optimism in the currency market, deteriorating relations between Beijing and Washington over the handling of the epidemic and Hong Kong should continue to weigh in on the pair.
The Chinese Yuan is on the defensive amidst growing concerns over the health of the Chinese economy. The country’s banking and insurance regulator has already raised the red flag reiterating that bad loans at banks stands at levels last seen during the financial crisis. The country has had to allow small firms to delay payments on loans and interest as a countermeasure in the wake of the COVID-19 pandemic.