Hong Kong Monetary Authority: The trading of Hong Kong dollars in the foreign exchange and interbank markets continues to be smooth and orderly.

On February 22, the Hong Kong Monetary Authority announced that the Hong Kong Monetary Committee learned that during the reporting period, the Hong Kong dollar fluctuated between 7.7906 and 7.8269 against the US dollar. The Hong Kong dollar strengthened in November, primarily driven by inflows of funds triggered by the rising Hong Kong dollar interest rates and net buying of Hong Kong stocks through the Southbound Hong Kong Stock Connect. The Hong Kong dollar interbank offer rate continued to follow the trend of the US dollar interest rates, while also being affected by local supply and demand. No triggering events for the Currency Board were observed during the reporting period, and the reserves remained stable at around HK$45 billion; the use of the discount window showed no abnormality. Overall, trading in the Hong Kong dollar foreign exchange and interbank markets continued to be smooth and orderly. At the end of the reporting period, the monetary base increased to HK$18,958.6 billion. All changes in the monetary base were in line with the changes in foreign exchange reserves, in accordance with the principles of the Currency Issuing Authority. The Committee noted that recent signs of cooling global growth and inflation have deepened market expectations of early rate cuts in 2024, stimulating a rise in major bond and stock markets by the end of 2023. However, tight labor markets in major advanced economies have led to sustained inflation in the service sector, and core inflation may stay higher than expected, potentially causing financial markets to overlook the possibility that interest rates may remain high for an extended period. On the other hand, the global commercial property market may face continued adverse factors, increasing pressure on banks involved in such business. In the Asia-Pacific region, despite the easing of depreciation and capital outflow pressures at the end of 2023, as well as increasing expectations of rate cuts in the US, weak external demand and other adverse factors will continue to pose pressure on the economies in the region. Meanwhile, due to data gaps and low transparency in non-bank financial intermediation markets, the increasing activities in the region will need to be closely monitored. Furthermore, with the continued recovery in inbound tourism and consumer demand, economic activity in Hong Kong steadily picked up before the end of 2023. Looking ahead, it is expected that these two factors will continue to support the Hong Kong economy in 2024, but growth prospects will face more uncertainties, including the trajectory of US policy rates, dimming global economic outlook, the pace of recovery in the global technology product cycle, and evolving geopolitical situations. The Hong Kong government relaxed demand management measures for residential properties at the end of October 2023, slightly improving sentiment in the property market, but the overall property and commercial property market remains soft in a high interest rate environment.