The meeting discussed the HKD's performance against the USD, noting fluctuations within a specific range and highlighting the usage of the weak-side CU. It also covered the economy's outlook, including potential risks and vulnerabilities, and provided updates on interbank liquidity and interest rates. The report also reviewed the changes in the Monetary Base and foreign reserves.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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SPOTLIGHT ON
FAMILY OFFICES
During the review period, the Hong Kong dollar ("HKD") traded within the range of 7.7705 – 7.8500 against the US dollar ("USD"), remaining close to the weak-side Convertibility Undertaking ("CU"). The weak-side CU was activated 12 times, leading to the Hong Kong Monetary Authority ("HKMA") buying HK$119.95 billion and reducing the Aggregate Balance to around HK$54 billion. Since mid-August, the HKD strengthened due to the firming of short-term HKD interbank rates ("HIBORs") and continued net buying flows through Southbound Stock Connect. HIBORs tracked their USD counterparts but were also influenced by local supply and demand. Concurrently, banks reduced their Best Lending Rates by 12.5 basis points, with rates ranging from 5.125% – 5.625% at the end of the review period. No significant anomalies were observed in the usage of the Discount Window. The HKD exchange and interbank markets functioned smoothly and orderly throughout the period.
At the end of the review period, the Monetary Base decreased to HK$2,020.69 billion, fully aligning with changes in foreign reserves in accordance with Currency Board principles. The Report on Currency Board Operations for the period is available in Annex.
The US economy demonstrated signs of softening due to increased tariffs and rising inflation, while labor demand lost momentum. Market concerns over fiscal and policy developments affected long-term US Treasury bond yields, further complicated by the recent US government shutdown. Asia's first-half 2025 economic growth was resilient, but lingering trade policy uncertainty and US tariffs continue to impact the region's integrated supply chain networks.
In the Chinese Mainland, economic growth momentum slowed in Q3 due to uncertainties such as additional tariffs and the softening of the local housing market. The economic outlook is clouded by these uncertainties.
In Hong Kong, the economy maintained robust growth in Q2, driven by strong exports and improved domestic demand. Looking ahead, the economy is expected to sustain moderate growth, supported by government measures, Mainland stimulus, and stabilising asset markets. The housing market further stabilised, while the commercial real estate market continues to grapple with high vacancy rates.
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