HKD/CNY Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Hong Kong Monetary Authority's interventions have led to significantly lower interest rates compared to the People's Bank of China, which is easing policy to stimulate growth.
• Risk/commodities: Recent declines in oil prices may pressure the HKD further, impacting the economy and trade activities.
• One macro factor: The Chinese government’s stimulus measures have bolstered their economy, creating upward support for the CNY.
Range: The HKD/CNY pair is likely to drift within its recent range, showing little volatility due to mixed signals from both economies.
What could change it:
• Upside risk: A notable increase in investment inflows into Hong Kong could strengthen the HKD.
• Downside risk: Continued monetary easing by the PBOC may lead to further depreciation of the HKD against the CNY.
