Hong Kong Dollar Exchange Rate Stability Amid Market Volatility: Currency Board Operations Report Released.

Record of discussion of meeting of Exchange Fund Advisory Committee Currency Board Sub-Committee held on July 2

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

(Approved for Issue by the Exchange Fund Advisory Committee on July 17, 2025)

Report on Currency Board Operations (April 17 - June 20, 2025)

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The Currency Board Sub-Committee (Sub-Committee) noted that the Hong Kong dollar (HKD) traded within a range of 7.7500 - 7.8499 against the US dollar (USD) during the review period. The HKD exchange rate firmed in the second half of April due to buoyant capital market activities and, in particular, continued net inflows through the Southbound Stock Connect. In early May, amid the sharp appreciation of some Asian currencies against the USD and continued equity-related demand, the strong-side Convertibility Undertaking (CU) was triggered four times, with the Hong Kong Monetary Authority (HKMA) selling HK$129.40 billion under the strong-side CU. The Aggregate Balance rose correspondingly to around HK$174 billion. While HKD interbank rates (HIBORs) generally track their USD counterparts under the Linked Exchange Rate System, they are also influenced by the local supply and demand of HKD funding. HIBORs softened as the supply of HKD funding was relatively abundant after the CU triggering. Widened negative HKD-USD interest rate spread incentivised carry trade activities which weighed on the HKD, easing to levels close to the weak-side CU in June. 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$2,125.03 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 the series of US tariff announcements since April, combined with heightened concerns over fiscal sustainability, had triggered volatility in global financial markets and contributed to a surge in long-term government bond yields across major advanced economies. For Asian economies, the imposition of widespread US tariffs and the ongoing uncertainty might undermine the region's growth momentum, exert pressure on regional financial markets, and impact its integrated supply chain networks.

The Sub-Committee noted that in Mainland China, exports continued to grow at a solid pace in April and May amid the US tariff hikes. While the China-US trade talks had helped ease some concerns around the Mainland's trade outlook, the economic growth outlook continued to face headwinds. In May, the Mainland authorities announced a financial policy package, which included cuts in the policy rate and the required reserve ratio, and rolled out measures to boost consumption, particularly in the services sector.

The Sub-Committee noted that in Hong Kong, while economic growth was higher than expected in Q1, the uncertainties stemming from the tariffs continued to weigh on the economy. However, multifaceted supportive measures, along with decreasing HKD interest rates and improved sentiment on the Mainland, could offset the adverse effects somewhat. Meanwhile, housing market sentiment showed signs of stabilisation amid the de-escalation of trade tensions and the decrease in mortgage rates, with transaction volume remaining broadly steady in May. The commercial real estate markets continued to face challenges due to the persistently high vacancy rates.

Interbank Liquidity and Interbank Interest Rates

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The Sub-Committee noted a paper that studied the relationship between HKD interbank liquidity and interbank interest rates.

Source: AI-found images

Labour Department highly concerned about fatal work accident that happened in Kai Tak today

The Labour Department (LD) is highly concerned about a fatal work accident that happened at a construction site in Kai Tak this afternoon (January 12). While a male worker was detaching the lifting gear connected to the top of a water tank, the water tank displaced suddenly, trapping the worker between the water tank and a bored pile casing nearby. He was certified dead later in hospital. The LD is saddened by the death of the worker and expresses its deepest sympathy to his family.

The LD's spokesman said, "We commenced an immediate on-site investigation as soon as we were notified of the accident and have issued suspension notices to the contractors concerned, suspending the use of mobile cranes for lifting operation at site concerned. The contractors cannot resume the work process until the LD is satisfied that suitable measures to abate the relevant risks have been taken."

The spokesman added, "We will complete the investigation as soon as possible to identify the cause of the accident, ascertain the liability of the duty holders and recommend improvement measures. We will take actions pursuant to the law if there is any violation of the work safety legislation."

To prevent workers from being struck or trapped by loads when engaged in unrigging process, the LD reminds employers to (i) ensure that the place supporting the loads is secure; and (ii) formulate proper unrigging methods for detaching lifting gear so as to prevent displacement of the objects in the course of unrigging operations.

The general duty provisions of the Occupational Safety and Health Ordinance require employers to provide safe working environments, plant and systems of work for their employees. Those who contravene the relevant provisions are liable to a maximum fine of $10 million and imprisonment for two years.

In regard to today's accident, the LD will issue a Work Safety Alert through its mobile application "OSH 2.0", website and email, giving a brief account of the accident concerned to duty holders, workers' unions, professional bodies of safety practitioners and others, and reminding the industry of the importance of following safety precautionary measures to prevent a recurrence of similar accidents.

The LD will also remind the employer concerned of the liability for employees' compensation under the Employees' Compensation Ordinance, assist family members of the deceased to claim employees' compensation and closely follow up on the case. For those with financial difficulties, the LD will assist them to apply for appropriate emergency funds. Subject to the needs and wishes of family members of the deceased, the LD will also liaise with the Social Welfare Department for financial or other assistance.

For the sake of securing the safety and health of employees at work, the LD appeals to employers to provide plant and systems of work that are safe and without risks to health. Employees should co-operate with their employers, adopt all safety measures and use personal protective equipment provided properly to avoid endangering their own work safety and that of other workers.

Source: AI-found images