HKMA waits as dollar falls again

Business | Reuters, Tracy Hu and Janice Huang 9 Mar 2018

Hong Kong Monetary Authority does not have plans to issue Exchange Fund bills to mop up liquidity in the market although the Hong Kong dollar fell to a new 33-year low at HK$7.84 against per dollar, says HKMA chief executive Norman Chan Tak-lam.

Chan said the issuance of additional HK$80 billion worth of Exchange Fund bills by the HKMA last year was solely in response to market demand for highly liquid instruments and had nothing to do with the strengthening or weakening of the HKD.

He added he hopes market players will not take it wrongly that the HKMA does not want the HKD to weaken.

The US Federal Reserve has raised interest rates five times since December 2015, widening the spreads between HKD interest rates and their USD counterparts and thereby encouraging funds to flow from the HKD into the USD.

"It is only natural that the HKD would weaken as a result," said Chan. "The HKMA will take action when the HKD exchange rate touches the weak-side Convertibility Undertaking (7.85) to ensure that it will not fall below 7.85."

Meanwhile, Hong Kong stocks rallied yesterday to recoup losses in the previous session, buoyed by China's robust trade data, and on news that US President Donald Trump's proposed tariffs may exclude certain key partners. The benchmark Hang Seng index, which opened 326 points higher and once gained 527 points to 30,724 in the afternoon session, closed 457 points or 1.5 percent higher at 30,654. The Hang Seng China Enterprises index rose 1.3 percent to 12,334.

China's exports unexpectedly surged at the fastest pace in three years in February, suggesting its economic growth remains resilient even as trade relations with the United States rapidly deteriorate.

China's February exports rose 44.5 percent from a year earlier, compared with analysts' median forecast for a 13.6 percent increase, and an 11.1 percent gain in January, official data showed.

Andrew Wong, chairman and chief executive of Anli Holdings said he has no worries about a trade war, predicting it won't happen, as the US dollar is still weakening.

In Anli's report of the market outlook in 2018, the company predicts the Hang Seng Index will reach 38,000 points as a base point and top at 42,000 points at a bull case.

The lowest level of the Hang Seng Index may be around 29,100 points this year, but there would be more worries in the second half of 2018, said Wong.

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