Hong Kong dollar stable as global economy faces challenges

The Hong Kong dollar (HKD) traded within a range of 7.7673 – 7.7900 against the US dollar from October to December 2025. The HKD strengthened in mid-October due to dividend payments and Southbound Stock Connect inflows, then eased in mid-November with softened interest rates, before firming towards year-end on seasonal demand.

HKD interbank rates (HIBORs) generally tracked their US counterparts but were also influenced by local funding supply and demand.

HIBORs eased during October and November, driven by equity-related demand, before firming again towards year-end on seasonal factors.

Following a decrease in the target range for the US federal funds rate in Q4, many banks reduced their Best Lending Rates by 12.5 basis points in early November, with rates ranging from 5.000% – 5.500% at the end of the review period.

The Convertibility Undertakings were not triggered, and the Aggregate Balance remained stable at around HK$54 billion.

The Monetary Base increased to HK$2,040.65 billion, fully matched by foreign reserves.

In the US, despite a trade truce and government reopening easing market jitters, the economy faced challenges from a "K-shaped" consumption divergence, concerns over the sustainability of the artificial intelligence (AI) boom, and a weakening labour market.

Asia's economic growth was supported by export diversification and the AI boom, but lingering trade policy uncertainty and potential propagation effects of US trans-shipment tariffs continued to pose headwinds.

The Chinese Mainland saw moderated economic growth in October and November 2025. However, the recent China-US trade truce is expected to help ease downward pressures on China's near-term exports and real GDP growth.

China plans to build a modern industrial system, enhance technological self-reliance, and boost consumption during its 15th Five-Year Plan period (2026-2030).