USD/HKD Outlook:
The USD/HKD exchange rate is likely to increase as it is trading near recent highs and above its 90-day average, supported by the current dynamics in U.S. monetary policy.
Key drivers:
• Rate gap: The Federal Reserve's potential for maintaining higher interest rates can enhance the appeal of the USD compared to the HKD.
• Risk/commodities: The overall risk-averse atmosphere may drive demand for the USD as a safe-haven currency.
• One macro factor: Continued interventions by the Hong Kong Monetary Authority (HKMA) to stabilize the HKD could have implications for its long-term strength.
Range:
The USD/HKD rate is likely to test the upper boundaries of its recent 3-month range, given the current trading environment.
What could change it:
• Upside risk: A more aggressive tightening stance from the Federal Reserve could strengthen the USD further.
• Downside risk: Any unexpected weakening in U.S. economic data, such as a decline in the New York Empire State manufacturing index, could affect the dollar negatively.