The Hong Kong Dollar in Foreign Exchange Market

The Hong Kong dollar (HKD) is considered to be an exotic currency in the Forex market. The most important thing you need to know about the HKD is that it is pegged to the U.S. dollar at an exchange-rate band of 7.75 to 7.85 Hong Kong dollars per 1 U.S. dollar (USD).

Trade Surplus or a Trade Deficit

Hong Kong runs a trade surplus of $18.07 billion, giving the country a ranking of 18 out of the 190 countries tracked by the CIA in The World Factbook(CIA.gov).

What Does Your Economy Export?

Hong Kong exports electrical machinery and appliances, textiles, apparel, footwear, watches and clocks, toys, plastics, precious stones, and printed material.

According to the World Trade Organization (WTO), Hong Kong exports $329.4 billion in goods and merchandise compared to only $86.3 billion in commercial services. The WTO breaks down those exports as follows:

Goods and Merchandise

• Agricultural products: 2.1 percent
• Fuels and mining products: 1.9 percent
• Manufactures: 92.6 percent

Commercial Services

• Transportation: 29.0 percent
• Travel: 19.1 percent
• Other commercial services: 51.9 percent

To Whom Does Your Economy Export?

The WTO ranks the following countries as the top destinations for exports from Hong Kong:

• China: 49.9 percent
• European Union: 13.6 percent
• United States: 11.2 percent
• Japan: 4.3 percent
• Taiwan: 2.3 percent

What Does Your Economy Import?

Hong Kong imports raw materials and semi-manufactures, consumer goods, capital goods, and foodstuffs.

According to the WTO, the country imports $352.2 billion in goods and merchandise compared to only $44.4 billion in commercial services. The WTO breaks down those imports as follows:

Goods and Merchandise

• Agricultural products: 4.9 percent
• Fuels and mining products: 5.4 percent
• Manufactures: 88.2 percent

Commercial Services

• Transportation: 30.7 percent
• Other commercial services: 33.3 percent

From Whom Does Your Economy Import?

The WTO ranks the following countries as the top sources of imports to Hong Kong:

• China: 45.8 percent
• Japan: 9.2 percent
• European Union: 8.0 percent
• Taiwan: 7.2 percent
• South Korea: 4.9 percent

Do You Have an Attractive Government Debt Market?

Hong Kong currently has a Moody’s rating of Aaa. It received this latest rating on November 10, 2010. This most recent rating was an upgrade from the Aa1 rating that the country had held previously. This is a positive sign for the country’s government debt market.

Do You Have an Attractive Equities Market?

Hong Kong has an attractive equities market. It is the eighth largest equities market in the world, with a total market value of $2.292 trillion (CIA.gov).

Central Bank Mandate

The primary monetary policy objective of the Hong Kong Monetary Authority (HKMA) is to maintain exchange-rate stability within the framework of the Linked Exchange Rate System through sound management of the Exchange Fund, monetary operations, and other means that are deemed necessary(info.gov).

Hong Kong has foreign currency reserves of $258,103 million and gold deposits of $94 million (imf.org).

Government Intervention in Forex

Because the Hong Kong dollar is pegged to the U.S. dollar, the Hong Kong Monetary Authority actively intervenes in the currency market.

Important Economic Announcements

When you are watching the economic announcements coming out of Hong Kong, make sure that you keep your eye on the following:

• Interest rates
• Employment
• Inflation
• Gross domestic product (GDP)
• Trade balance

Are You a Safe-Haven Currency?

No, the Hong Kong dollar is not considered to be a safe-haven currency.

How Can I Trade You?

You can trade the Hong Kong dollar using the following:

• Spot Forex