The meeting of the Exchange Fund Advisory Committee Currency Board Sub-Committee held on 30 April 2025 discussed the operations of the currency board. The HKD traded smoothly within a range of 7.7555 – 7.7927 against the USD, and the Monetary Base increased to HK$1,980.99 billion. Global economic risks were noted, particularly due to US tariffs. The report includes a discussion on the usage of the Discount Window and the stigma effect.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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The Exchange Fund Advisory Committee Currency Board Sub-Committee conducted a review of currency board operations from 25 December 2024 to 16 April 2025 at its meeting on 30 April 2025. During this period, the Hong Kong dollar ("HKD") maintained a trading range of 7.7555 to 7.7927 against the US dollar ("USD"). Early in January, the exchange rate remained stable, but it strengthened in mid-February and further in early April due to the US tariffs and strong local stock market performance. The Hong Kong interbank rates ("HIBORs") mirrored the USD rates, with short-term rates influenced by local supply and demand. The Convertibility Undertakings were not activated, and the Aggregate Balance remained stable at approximately HK$45 billion.
The Sub-Committee observed that the Monetary Base increased to HK$1,980.99 billion at the end of the review period, with all changes in the Monetary Base matched by changes in foreign reserves, adhering to the Currency Board principles. The report on currency board operations for the period in question is detailed in Annex.
In assessing risks and vulnerabilities, the Sub-Committee noted the intensification of global economic downside risks following the announcement of US reciprocal tariffs. While global financial markets functioned smoothly, the potential for further tariffs posed significant challenges. The Mainland Chinese economy exhibited signs of recovery with improved equity market sentiment but faced external pressures from US tariffs. The Mainland economy was expected to focus on consumption support.
In Hong Kong, the growth outlook faced increased downside risks due to US reciprocal tariffs. However, factors such as Mainland’s pro-growth policies, anticipated US rate cuts, and recovering inbound tourism may mitigate the impact. March saw the housing market gain momentum due to stamp duty adjustments, but market sentiment turned conservative in early April. The commercial real estate market, particularly the office segment, remained subdued.
The Sub-Committee also reviewed a paper analyzing the usage of the Hong Kong Monetary Authority's ("HKMA") Discount Window and the stigma effect experienced by banks. The paper found that the Discount Window was utilized more frequently and the stigma diminished during the current period of tight liquidity compared to previous periods in 2018-2020. This trend coincided with the HKMA’s efforts to communicate proactively and alleviate stigma concerns.
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