USD/HKD in a tight range after robust Hong Kong trade data

Written by: Crispus Nyaga
January 26, 2021
  • The USD/HKD is in a tight range today after Hong Kong published its trade numbers.
  • Hong Kong's exports increased by 11.7% due to strong global demand.
  • Imports also increased by 14.1% leading to a trade deficit of more than H$45 billion.

The USD/HKD is at the lower side of Hong Kong’s currency peg after the city delivered impressive trade numbers. It is trading at 7.7515, where it has been in the past few months.

USD/HKD price action

Hong Kong trade improved in December

In a report released earlier today, the Hong Kong statistics bureau said that the city’s exports and imports were better than in November. In total, exports from Hong Kong increased by 11.7% in December after rising by 5.6% in the previous month. That was the fastest rate of growth since November 2018.

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In the same period, imports increased by 14.1% after rising by 5.1% in the previous month. As a result, the trade deficit – exports minus imports – increased to more than h$45.7 billion. In the same month in 2019, the deficit was more than h$32.4 billion.

This performance was mostly due to strong demand for Hong Kong’s goods from major markets like the Mainland China and the United States. As the world economy recovers, Hong Kong officials expressed hope that the trend will continue.

Also, economists expect that the Hong Kong economy will continue rebounding because of the coronavirus vaccine. The vaccine, coupled with the recently-passed national security law, will help to draw more tourists to the city.

Another factor likely to affect the USD/HKD is the strength of the Hong Kong stock market. In the next few years, more Mainland companies will possibly chose the city instead of New York. For example, in the next few weeks, Kuaishou, a Chinese rival to Tik Tok is raising more than $6.2 billion in the city. That will make it the biggest IPO since Saudi Aramco.

While Biden will possibly be more understanding than Trump, many Mainland companies will go to Hong Kong to avoid more restrictions from the US.

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USD/HKD technical outlook

USD/HKD technical chart

Conducting a technical analysis on the USD/HKD pair is relatively difficult since the Hong Kong dollar is not a free-floating currency. Instead, the Hong Kong Monetary Authority (HKMA) has the mandate to ensure that it remains between H$7.75 and H$7.85 against the US dollar. So, consider practising in a forex demo accountbefore you trade the pair.

The hourly chart shows that the USD/HKD has been little changed in the past few weeks. It remains slightly above the 25-day and 15-day exponential moving averages. Therefore, in the near term, I expect the pair to remain at the current range as Hong Kong’s authorities assess the actions of the new Biden administration.