- HKD Dollar Peg Concerns
- Hong Kong Capital out Flow Concerns
- Beijing- Washington Standoff
Hong Kong dollar is struggling for direction after plunging to four-year lows in the aftermath of rising tensions between the autonomous region and Beijing. The autonomous region has also found itself caught in a bitter standoff between Beijing and Washington, a development that has led to further weakening of the HKD against the dollar.
The City’s Financial Secretary, Paul Chan, moving to assure investors that the Dollar peg on HKD will remain in place amidst rising tensions has had little effect on HKD strength in the forex market. Investors have raised concerns as to whether Hong Kong will hang on the Dollar peg following a push by Beijing to impose a new security law on the city.
Time : 04-06-2020
Pivot : $7.7499
Technical View : Long Above $7.7501
Target : $7.7503 next 2 targets are $7.7509 and $7.7512
Comments : Weak Bearish To Neutral
Last Price : $7.7499
Technical View : Short below $7.7497
Target : $7.7495 next 2 targets are $7.7491 and $7.7488
Washington threatening to withdraw some of the trade perks that the city has enjoyed, has all but gone to exacerbate the situation. The standoff continues to fuel concerns of possible capital outflows, a move likely to put more pressure on the HKD.
The Financial Secretary has since moved to quash the concerns by reiterating that China’s Central Bank would be up to the task of providing the much-needed dollars should Washington impose sanctions. Hong Kong should be able to tap currency swaps from the People’s Bank of China to cover any shortfall from the U.S
Amidst the concerns, the Hong Kong Dollar continues to trade at the strong end of its permitted range despite plummeting to four-year lows against the dollar. In addition, the HKD could strengthen in the months ahead as impeding public share sales in the city would likely attract new cash flow leading to further strengthening in the HKD.
In addition, evidence of cash outflow from Hong Kong is scant with initial data indicating that bank deposits in Hong Kong might have increased in April by as much as 0.4%. Likewise, the Hong Kong Dollar continues to benefit from weakness in the U.S Dollar, which is under immense pressure in the forex market following widespread riots over police brutality.