HKD Falls as Hong Kong Economy Falls to 3-Year Lows

governs itself and has its own
local currency known as Hong Kong dollar. The city’s economy is sustained
mostly by the finance sector. Most international banks like Standard Chartered,
HSBC, Goldman Sachs, and Credit Suisse have a large presence there. It is also
home to many hedge funds and private equity firms. Other sectors that have
continued to support the economy are retail, shipping, and real estate.

As a result of its international
nature, Hong Kong is usually affected by the developments in the world economy.
The evidence of this was seen earlier today when the city released its GDP
numbers for the fourth quarter. The numbers showed that the economy grew by
1.3%, which was its lowest rate of growth in almost three years. The government
had forecasted a growth of 3.2%.

The city’s Finance Secretary,
Paul Chan blamed this on the trade conflict between the US and China as well as
other factors like the uncertainties about Brexit. For the year, the exports
had an annual growth rate of 3.5%. However, shipments declined 0.2% in the
fourth quarter. For this year, the economy is expected to potentially grow by 2
to 3%. In the statement, Chan said that the uncertain global climate may restrain
the city’s economic performance.

However, there are hopes that the
economy may recover this year if the US and China are successful in finalizing
a trade deal. The two countries are currently engaged in negotiations, whose
goal is to resolve the conflict that started last year. This may also be
boosted if there is an orderly exit plan for Brexit.

After the GDP numbers were
released, the Hong Kong dollar, which is pegged to the USD declined slightly as
shown below. In the past few weeks, the pair USD/HKD pair has moved up from a
low of 7.800 to a high of 7.8510, which was reached this week. These levels
provide an important resistance to the pair as shown below. There is a
likelihood that the pair will remain along these levels in the near term.

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