HKD Shows Stability Amid Global Economic Risks, Reports Hong Kong Monetary Authority

Record of discussion of meeting of Exchange Fund Advisory Committee Currency Board Sub-Committee held on April 30

The following is issued on behalf of the Hong Kong Monetary Authority:

(Approved for Issue by the Exchange Fund Advisory Committee by circulation)

Report on Currency Board Operations (25 December, 2024 - 16 April, 2025)

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The Currency Board Sub-Committee (Sub-Committee) noted that the Hong Kong dollar (HKD) traded within a range of 7.7555 - 7.7927 against the US dollar (USD) during the review period. The HKD exchange rate moderated in early January 2025 as liquidity tightness subsided at the end of 2024 and global markets reacted to US tariff announcements, but strengthened in mid-February 2025, supported by strong performance of the local stock market amid Mainland China's recent advancements in artificial intelligence and net inflows from the Southbound Stock Connect. In early April, in response to further US tariffs, the HKD strengthened further as long USD carry trades unwound amid a risk-off sentiment and southbound inflows continued. HKD interbank rates (HIBORs) continued to track the USD rates while shorter-tenor rates were also being affected by local supply and demand. Short-term HIBORs tightened briefly near the year-end but softened thereafter as funding demand faded. The Convertibility Undertakings were not triggered during the review period and the Aggregate Balance was stable at around HK$45 billion. No abnormality was noted in the usage of the Discount Window. Overall, the HKD exchange and interbank markets continued to trade in a smooth and orderly manner.

The Sub-Committee noted that the Monetary Base increased to HK$1,980.99 billion at the end of the review period. In accordance with the Currency Board principles, all changes in the Monetary Base had been fully matched by changes in foreign reserves.

The Report on Currency Board Operations for the review period is at Annex.

Monitoring of Risks and Vulnerabilities

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The Sub-Committee noted that downside growth risks to the global economy had intensified following the US announcement of imposing reciprocal tariffs that exceeded market expectations. In response, global financial markets had gyrated, although they continued to operate smoothly with no sign of widespread funding stress. While the postponement of reciprocal tariffs had offered some reprieve for export-reliant Asian economies which generally faced higher rates, the prospect of tariffs being implemented further down the road still posed significant growth headwinds.

The Sub-Committee noted that in Mainland China, the economy entered 2025 amid some green shoots and improved equity market sentiment. In particular, at the "two sessions" in March, the authorities sent strong pro-growth signals, including prioritising consumption and strengthening fiscal support. From April onwards, the Mainland economic outlook faced stiffer external headwinds due to the US reciprocal tariffs. It was expected that Mainland China would place increasing emphasis on supporting consumption.

The Sub-Committee noted that in Hong Kong, downside risks to the growth outlook heightened following the imposition of the US reciprocal tariffs. Yet, several factors might help alleviate some of the impact, including the Mainland's pro-growth policies and its advancement in artificial intelligence, the prospective US rate cuts expected by the markets, and the ongoing recovery of inbound tourism. Meanwhile, housing market transactions gained momentum in March following the Government's adjustment in stamp duties for lower-value properties, although market sentiment turned conservative in early April amid the global financial market volatility. The commercial real estate markets remained subdued, especially in the office segment.

A Study on "Discount Window Stigma"

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The Sub-Committee noted a paper that examined the usage of the Hong Kong Monetary Authority's (HKMA)Discount Window and the associated "stigma effect" by banks over time. The results showed that the Discount Window was tapped more frequently and the associated stigma diminished in the current period of tight liquidity, compared with the previous period of tight liquidity in 2018 - 2020. This trend coincided with the HKMA's proactive communication efforts with banks to alleviate concerns about the "stigma effect" during recent periods.

CHP reminds public on precautions against heat stroke during very hot weather

The Centre for Health Protection (CHP) of the Department of Health (DH) today (July 13) reminded members of the public, particularly those undertaking outdoor activities, to take heed of necessary measures against heat stroke and sunburn in very hot weather.

"The public should carry and drink plenty of water to prevent dehydration while engaging in outdoor activities," a spokesman for the CHP said.

"Those engaged in strenuous outdoor activities should avoid beverages containing caffeine, such as coffee and tea, as well as alcohol, as they speed up water loss through the urinary system," the spokesman explained.

"Infants and children, the elderly, pregnant women, those with chronic illnesses such as heart disease or high blood pressure, outdoor/manual workers, and individuals who are overweight are more vulnerable to heat stroke. They should pay special attention," the spokesman added.

The public should adopt the following precautions:

Wear loose and light-coloured clothing to reduce heat absorption and facilitate sweat evaporation and heat dissipation;

Avoid vigorous exercise and prolonged activities like hiking or trekking as heat, sweating and exhaustion can place additional demands on the physique;

Perform outdoor activities in the morning or the late afternoon, if possible;

For indoor activities, open all windows, use a fan or use air-conditioning to maintain good ventilation;

Do not stay inside a parked vehicle; and

Reschedule work to cooler times of the day if feasible. If working in a hot environment is inevitable, introduce shade in the workplace where practicable. Start work slowly and pick up the pace gradually. Move to a cool area for rest at regular intervals to allow the body to recuperate.

​The public should also note the latest and the forecast Ultraviolet (UV) Index released by the Hong Kong Observatory (HKO). When the UV Index is high (6 or above):

Minimise direct exposure of the skin and the eyes to sunlight;

Apply a broad-spectrum water-resistant sunscreen product with a sun protection factor (SPF) of at least 30 or higher when participating in outdoor activities. Reapply every two hours if you need to stay outdoors for a prolonged period, or after swimming, sweating or towelling off;

While using DEET-containing insect repellents for personal protection against mosquito-borne diseases, apply sunscreen first, then insect repellent;

Seek shade;

Wear UV-blocking sunglasses;

Wear long-sleeved and loose-fitting clothes; and

Wear a wide-brimmed hat or use an umbrella.

​If symptoms develop, such as dizziness, headache, nausea, shortness of breath or confusion, rest and seek help immediately, and seek medical advice as soon as possible.

​The public may obtain more information from the DH's Health Education Infoline (2833 0111),heat strokepage andUV radiationpage; the HKO's Dial-a-Weather (1878 200),latestweather report and forecast,UV Indexand weather information forhiking and mountaineering; andpress releasesof the Labour Departmenton precautions against heat stroke for outdoor workers and their employers when the Very Hot Weather Warning is in force.