- Summary:
- The USDHKD was relatively stable even as political risks increased in Hong Kong. The pair also ignored the weak exports and imports data from Hong Kong
The USDHKD remained stable even as Hong Kong remained in crisis following the decision by China to bypass Hong Kong law. The USDHKD is trading at 7.7540, which is slightly above the YTD low of 7.7495.
USDHKD stable amid new Hong Kong crisis
On Friday, China unveiled new plans to bypass Hong Kong legislature and set-up security operations in the city. Although the China-friendly Hong Kong government supported the bill, many people in Hong Kong resisted it.
That is because by imposing its security apparatus in the city, China was going against the one country, two systems that was adopted in 1997. Also, they fear that its residents will be forced to face trial under the Chinese law. China has rejected these claims, saying that it just wants peace and order in the city.
Yesterday, protests in the city started, leading to the arrest of more than 120 people. Others were injured and are being treated in hospitals.
Analysts believe that China is not only threatening Hong Kong, but also the US. In an editorial, Bloomberg said that the country was daring the US to respond at a time when the number of deaths is approaching 100,000.
Hong Kong trade slumps
The USDHKD was also relatively stable as data showed that Hong Kong trade disappointed in April. Data from the statistics office showed that exports declined by 3.7% to $309 billion in April. Imports declined by 6.7% to $332 billion. That brought the trade deficit to more than $23.3 billion. These numbers were slightly better than those recorded in March.
Similarly, the volume of trade reported in the first four months fell by 8.1% over the same period last year. The trade deficit widened to more than $127 billion.
The Hong Kong dollar has been relatively stable because of a managed peg the central bank has retained on the currency. This peg ranges between $7.75 and $7.85.
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USDHKD technical outlook
The USDHKD pair is trading at 7.7543. On the daily chart, the pair has remained near the current level due to the coronavirus pandemic. This price is slightly below the 50-day and 100-day EMA. Therefore, since the Hong Kong dollar has a managed peg, don’t expect it to weaken against the US dollar unless the HKMA intervenes.