Record of discussion of meeting of Exchange Fund Advisory Committee Currency Board Sub-Committee held on May 4
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 (December 30, 2025 - April 22, 2026)
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The Currency Board Sub-Committee (Sub-Committee) noted that the Hong Kong dollar (HKD) traded within a range of 7.7818 - 7.8387 against the US dollar (USD) during the review period. The HKD eased in early 2026 as HKD interbank rates (HIBORs) softened upon the fading of year-end funding demand, thereby increasing the incentive for carry trade activities. With uncertainty arising from the Middle East conflict in early March, investors unwound short HKD positions and drove the HKD stronger. Nonetheless, carry trade activities incentivised by HKD interest rates moving lower than their USD peers had brought the HKD weaker, and the thin liquidity due to global risk-off sentiment had exaggerated the spot price movements. Towards the quarter end, the HKD rebounded slightly due to the unwinding of short positions as short-dated interest rates firmed. While HIBORs generally tracked their USD counterparts under the Linked Exchange Rate System, they were also influenced by the local supply and demand of HKD funding. Capital market-related HKD funding demand subsided amid the escalating geopolitical risk in the Middle East. HKD short-dated interest rates eased gradually in response, before firming again towards the quarter end and remaining firm thereafter. The Convertibility Undertakings were not triggered and the Aggregate Balance was stable at around HK$54 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$2,061.37 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 atAnnex.
Monitoring of Risks and Vulnerabilities
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The Sub-Committee noted that the Iran conflict had disrupted commodity supplies, adding global inflationary pressures, as well as triggering financial market sell-offs and undermining prospects for global economic growth. The ongoing stalemate in US-Iran negotiations, coupled with the newly imposed US naval blockade, had intensified upward pressure on energy prices. Combined with renewed US trade policy uncertainty following the Supreme Court's International Emergency Economic Powers Act ruling, these developments had significantly complicated the outlook for global monetary policy.
The Sub-Committee noted that in Asia, economic resilience had continued to be supported by strong exports, driven by both the ongoing demand for artificial intelligence (AI)-related goods and the further expansion of non-tech products. However, the Iran conflict had increased uncertainty across the region, given that most regional economies were net energy-importers. The severity of the impact would depend heavily on the breadth and duration of the conflict, as well as economy-specific exposures, economic structures, and policy responses.
The Sub-Committee noted that in the Chinese Mainland, economic activities improved and beat expectations in Q1 2026 while deflationary pressure significantly eased. The economic outlook faced new uncertainties from the Iran conflict. At the Two Sessions in March, the Central Government lowered the 2026 growth target to 4.5 per cent - 5 per cent and kept the fiscal deficit target unchanged at 4 per cent of GDP, with stable off-budget special government bond issuance.
The Sub-Committee noted that in Hong Kong, the economy continued to expand in early 2026, supported by strong growth of merchandise exports, inbound tourism and retail sales. However, the energy shock triggered by the military conflict in the Middle East had shown early signs of impact on certain sectors. Meanwhile, the housing market maintained its upward momentum amid positive market sentiment, while the commercial real estate markets remained under pressure but with some signs of improvement in the Grade A offices in prime districts observed. Looking ahead, downside risks to the economic outlook included elevated uncertainty surrounding the ongoing geopolitical tensions, the sustainability of the AI investment boom, evolving global trade policies and the US policy rate path.
Review of External Demand for HKD Currency
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The Sub-Committee noted a paper that reassessed the evolution of demand for HKD currency, amid growing e-payment adoption and the post-pandemic environment in recent years.
Source: AI-found images
SFST leads delegation to visit Hangzhou
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, led a 30-plus-strong delegation of representatives from financial institutions and industry leaders to visit Hangzhou today (June 15).
In the morning, Mr Hui and the Permanent Secretary for Financial Services and the Treasury (Financial Services), Mrs Angelina Cheung, met with the Director of the Hong Kong and Macao Affairs Office of the People's Government of Zhejiang Province, Mr Gu Jianxin, and the Deputy Director-General of the Department of Commerce of Zhejiang Province, Mr Shi Qiqi, to brief them on the purpose of bringing the delegation to Hangzhou. Mr Hui expressed his anticipation of strengthening connections between Hangzhou enterprises and Hong Kong financial professionals, thereby deepening mutual understanding and jointly capturing the global market opportunities.
Mr Hui and Mrs Cheung then joined the delegation for a networking luncheon themed "Hong Kong financial sector empowering Mainland enterprises to go global" and co-organised by the Hong Kong Economic and Trade Office in Shanghai, Invest Hong Kong, and the Department of Commerce of Zhejiang Province. The luncheon focused on discussions about how Mainland enterprises can leverage Hong Kong's financial advantages for securing financing and going global. Speakers shared insights with attendees from over 300 enterprises on topics such as establishing corporate treasury centres in Hong Kong, raising international capital, expanding businesses to global markets through Hong Kong, and Hong Kong's tax rules. The luncheon attracted over 400 corporate representatives to attend.
In his keynote speech at the luncheon, Mr Hui stated that the global economic and trade landscape, industrial division of labour, and capital flows are all undergoing profound restructuring. Mainland enterprises going global together is now an inevitable trend but at the same time presents a wealth of opportunities. He expressed the hope that this visit to Hangzhou, joined by industry leaders of the Hong Kong financial profession, will integrate the financial edge of Hong Kong with Hangzhou's digital technologies, bringing a synergy effect to achieve mutual empowerment and support Hangzhou enterprises in their journey to explore international markets.
He said, "As a powerhouse of the private and digital economies, Zhejiang Province stands as a premier hub for advanced manufacturing. Hangzhou is in particular the cradle of innovation for the digital economy, nurturing a vast cluster of vibrant, highly innovative premium enterprises with a strong ambition to expand globally. Hong Kong's core strengths lie in international finance, cross-boundary investment and financing services, world-class professional services, and alignment with international standards. All these attributes perfectly match the critical demands of Zhejiang enterprises seeking global expansion. With the high complementarity of resources and industrial synergy between Zhejiang and Hong Kong, it is indeed an impeccable integration of the real economy and international finance."
He added that by leading a financial delegation with over 30 industry leaders to Hangzhou, Suzhou and Shanghai at a time that marks the beginning of the National 15th Five-Year Plan, he is in the hope of supporting the strategic development of the Yangtze River Delta (YRD)'s core economy with Hong Kong's robust financial foundations. The delegation, which comprises industry leaders from Hong Kong's finance, insurance, accounting, and technology sectors, will gain precise insights into the needs of enterprises through visiting these three cities. This will in turn help connect Hong Kong's top-tier world-class services with premium enterprises in the YRD, thereby making greater contributions to the high-quality development of the region in the future.
At the networking luncheon, Mr Hui also witnessed the signing of a Memorandum of Understanding (MOU) between the Financial Services and the Treasury Bureau and the People's Government of Hangzhou Municipality. The MOU aims to promote exchanges, connectivity and innovative development between Hong Kong and Hangzhou Municipality in areas such as capital markets, fintech, wealth management and insurance, with a view to achieving mutual benefit and win-win outcomes for the industries.
In the afternoon, the delegation visited the Ant Group Headquarters, where they were received by the Chairman of the Ant Group, Mr Eric Jing, and were given an introduction to the group's global development strategy. The two parties discussed how the Group could utilise Hong Kong's financial market to go further.
The delegation then proceeded to visit Manycore Tech Inc, where they met with its Executive Director and Chief Financial Officer, Mr Shen Bei. The two parties had a discussion on how the company, following its listing in Hong Kong, can strategically leverage the city's advantages in capital financing, foreign exchange management and cross-boundary diversified finance as an international financial centre to further expand its global footprint.
The delegation also visited the Institute of Global Development, Zhejiang University. The Institute was established this March, with an aim to provide training for mid-to-senior level personnel from governments and corporations worldwide to advance and deepen the implementation of global development initiatives.
Mr Hui and the delegation will visit Suzhou tomorrow (June 16).
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
SFST leads delegation to visit Hangzhou Source: HKSAR Government Press Releases
