HKMA Sub-Committee notes stable HKD, global risks
The HKMA Currency Board Sub-Committee observed that the Hong Kong dollar traded smoothly despite volatility, while global geopolitical tensions complicate the economic outlook. The Monetary Base increased to HK$2,061.37 billion.
HKD navigated volatility smoothly
During the review period from December 30, 2025, to April 22, 2026, the Hong Kong dollar (HKD) traded between 7.7818 and 7.8387 against the US dollar.
The HKD initially eased due to softening interbank rates (HIBORs) and increased carry trade activities, but strengthened in early March as investors unwound short positions amid Middle East conflict uncertainty.
Despite this, carry trade incentives and thin liquidity exaggerated spot price movements, leading to a weaker HKD before a slight rebound towards the quarter end.
HIBORs generally tracked their US dollar counterparts but were also influenced by local HKD funding demand, which subsided amid escalating geopolitical risks.
The Convertibility Undertakings were not triggered, and the Aggregate Balance remained stable at around HK$54 billion.
The Monetary Base increased to HK$2,061.37 billion, fully matched by changes in foreign reserves, in line with Currency Board principles.
Overall, the HKD exchange and interbank markets operated in an orderly manner.
Geopolitical tensions cloud global outlook
The Sub-Committee noted that the Iran conflict disrupted commodity supplies, fueling global inflationary pressures, triggering financial market sell-offs, and undermining global economic growth prospects.
The ongoing US-Iran stalemate and naval blockade intensified energy price pressures.
Combined with renewed US trade policy uncertainty, these developments significantly complicated the global monetary policy outlook.
In Asia, economic resilience continued, driven by strong exports of AI-related and non-tech goods, though the Iran conflict increased regional uncertainty for net energy-importers.
Chinese Mainland economic activities improved in Q1 2026, with eased deflationary pressure, but also faced new uncertainties from the conflict.
China's 2026 growth target was lowered to 4.5–5%, with a 4% fiscal deficit target.
Outlook remains highly uncertain
The Middle East conflict and evolving global trade policies significantly complicate the outlook for global monetary policy and economic growth.
While Asian economies show resilience, the energy shock and geopolitical tensions introduce substantial downside risks for Hong Kong.
Navigating these uncertainties will require careful monitoring of both global and local developments.