(Approved for Issue by the Exchange Fund Advisory Committee by Circulation)
Report on Currency Board Operations (21 June 2025 – 8 October 2025)
- The Currency Board Sub-Committee (Sub-Committee) noted that the Hong Kong dollar (HKD) traded within a range of 7.7705 – 7.8500 against the US dollar (USD) during the review period. The HKD stayed close to the weak-side Convertibility Undertaking (CU) between mid-June and mid-August, and the weak-side CU was triggered 12 times during the review period. With the HKMA buying HK$119.95 billion under the weak-side CU, the Aggregate Balance fell correspondingly to around HK$54 billion. Since mid-August, the HKD had strengthened as short-term HKD interbank rates (HIBORs) firmed and net buying flows through Southbound Stock Connect continued. While HIBORs generally tracked their USD counterparts under the Linked Exchange Rate System, they were also influenced by the local supply and demand of HKD funding. Amid the reduction in the Aggregate Balance, HIBORs picked up since mid-August and the negative HKD-USD interest rate spread narrowed. Meanwhile, following the decrease in the target range for the US federal funds rate in mid-September, many banks reduced their Best Lending Rates by 12.5 basis points, and the Best Lending Rates in the market ranged from 5.125% – 5.625% at the end of the review period. No abnormality was noted in the usage of the Discount Window. Overall, the HKD exchange and interbank markets continued to trade in a smooth and orderly manner.
- The Sub-Committee noted that the Monetary Base decreased to HK$2,020.69 billion at the end of the review period. In accordance with the Currency Board principles, all changes in the Monetary Base had been fully matched by changes in foreign reserves.
- The Report on Currency Board Operations for the review period is at Annex.
Monitoring of Risks and Vulnerabilities
- The Sub-Committee noted that the US economy showed signs of softening amid higher tariffs, with inflation rising on the one hand and labour demand losing momentum on the other. Meanwhile, market concerns over fiscal and policy developments had affected long-term US Treasury bond yields. The recent US government shutdown added further uncertainty to the US economic outlook. While Asia recorded resilient growth in the first half of 2025, lingering trade policy uncertainty and the potential effects of direct and indirect US tariffs on the broader region would continue to weigh on Asia’s integrated supply chain networks.
- The Sub-Committee noted that in the Chinese Mainland, growth momentum moderated in Q3. The near-term economic outlook was clouded by various uncertainties and risks, such as additional tariffs and their repercussions on global trade, as well as renewed softness in the local housing market.
- The Sub-Committee noted that in Hong Kong, the economy maintained solid growth in Q2 on the back of strong exports performance and improved domestic demand. Looking ahead, the Hong Kong economy was expected to sustain moderate growth, driven by various factors such as government support, the Mainland’s economic stimulus measures, and stabilising asset markets. The housing market stabilised further alongside strengthened market sentiment, whereas the commercial real estate markets continued to face challenges of high vacancy rates.
Updates on Interbank Liquidity and Interbank Interest Rates
- The Sub-Committee received an update on the relationship between HKD interbank liquidity and interbank interest rates, incorporating recent market observations and insights.
Hong Kong Monetary Authority
28 November 2025
