The Exchange Fund Advisory Committee Currency Board Sub-Committee met on 4 May 2026 to review operations from 30 December 2025 to 22 April 2026. The HKD traded between 7.7818 and 7.8387 against the USD, with the Monetary Base at HK$2,061.37 billion. Risks included the Iran conflict and US policy uncertainty, while Hong Kong's economy expanded in early 2026.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
SPOTLIGHT ON
FAMILY OFFICES
On Mon, 15 Jun, the Exchange Fund Advisory Committee Currency Board Sub-Committee convened on 4 May 2026 to examine operations spanning 30 December 2025 to 22 April 2026.
Currency Board Operations and Monetary Stability
During the review period, the Hong Kong dollar traded within a range of 7.7818 to 7.8387 against the US dollar. While HKD interbank rates softened in early 2026 due to fading year-end funding demand, incentivizing carry trades, the Middle East conflict in March prompted investors to unwind short positions, strengthening the currency. Subsequent liquidity constraints and lower HKD interest rates relative to USD peers exerted downward pressure, yet the Convertibility Undertakings remained untriggered, with the Aggregate Balance stabilizing at approximately HK$54 billion. No irregularities were observed in the Discount Window, and markets operated smoothly.
Pursuant to Currency Board principles, the Monetary Base rose to HK$2,061.37 billion by the period's end, fully backed by corresponding foreign reserve adjustments. Detailed figures are provided in the Annex to the Report on Currency Board Operations.
Global and Regional Macroeconomic Context
Global inflationary pressures and economic growth prospects were undermined by the Iran conflict, which disrupted commodity supplies and intensified energy prices following a US naval blockade and stalemate in negotiations. Compounded by US Supreme Court rulings on the International Emergency Economic Powers Act and trade policy uncertainties, the global monetary policy outlook became significantly more complex. In Asia, economic resilience persisted through strong exports of AI-related and non-tech goods; however, the region's status as net energy-importers exposed it to conflict-related uncertainty. In the Chinese Mainland, Q1 2026 economic activities surpassed expectations with easing deflationary pressure, though the Central Government adjusted the 2026 growth target to 4.5–5% while maintaining a 4% fiscal deficit target.
Hong Kong Economic Performance and Outlook
Hong Kong's economy expanded in early 2026, bolstered by merchandise exports, tourism, and retail sales, though the Middle East energy shock began affecting specific sectors. The housing market remained buoyant, while commercial real estate showed mixed results with improvements in prime Grade A offices. Future risks include geopolitical tensions, AI investment sustainability, trade policy shifts, and the US policy rate trajectory. Additionally, a paper was presented reassessing HKD currency demand evolution amidst rising e-payment adoption and post-pandemic conditions.
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