Recent forecasts and market developments indicate that the exchange rate for the Hong Kong Dollar (HKD) against the Chinese yuan (CNY) is under noticeable pressure. As of early December 2025, the HKD is trading near 90-day lows at approximately 0.9048 CNY, which is about 0.9% under its three-month average. This reflects a stable range fluctuation, with the currency having traded within a 1.5% bandwidth.
The HKD's trajectory has been significantly influenced by recent interest rate adjustments from the Hong Kong Monetary Authority (HKMA). In late October, the HKMA reduced its base interest rate by 25 basis points to 4.25%, aligning its policy with the U.S. Federal Reserve's similar actions. This decision aims to stimulate the local economy but has contributed to increasing the interest rate differential between the HKD and other currencies, particularly the CNY. Analysts note that such differentials can foster carry trade activities, impacting the strength of the HKD.
Furthermore, the HKMA has been active in the foreign exchange market, implementing interventions to support the HKD as it approached the weak end of its trading band against the USD. State intervention has included purchasing billions of HKD to stabilize its value, reflecting ongoing efforts to maintain the currency peg amid rising capital inflows and changing interest rate landscapes.
On the other hand, the CNY's outlook remains bolstered by actions from the People’s Bank of China (PBOC) to prevent sharp fluctuations in the yuan's value. Major state-owned banks have been buying U.S. dollars to mitigate appreciation pressures on the CNY, which has recently seen significant gains against the USD. This strategic approach aims to enhance the yuan's stability amidst a cautious economic backdrop dominated by weakness in China's real estate sector.
Global investment firms forecast that the yuan could strengthen beyond the key 7 per dollar threshold in 2026, driven by favorable trade relations and narrowing yield differentials. This sentiment is further supported by stimulus measures and government efforts to bolster domestic demand, which might counteract potential depreciation pressures on the CNY.
As the currency markets evolve, the interplay between the HKD and CNY underscores the complexities facing traders. The current forecasts suggest further monitoring of interest rate movements, intervention strategies, and broader economic recovery signals in both regions will be crucial for stakeholders looking to navigate international transactions effectively.
