- Hong Kong’s third quarter GDP growth came in better than expected
- However, the Hong Kong Dollar still weakened against a generally stronger greenback
- The currency may be as focused on politics as economics
The Hong Kong Dollar had been a victim of general US Dollar strength on Friday, but it got a modest late fillip on news that the region’s growth was better than expected in the year’s third quarter.
Official data showed and expansion of 0.6% compared to the second quarter and 1.9% compared to the third quarter of 2015. That was rather above the 0.3% and 1.6% respective gains which the markets had been looking for.
Hong Kong has now notched up two quarters of accelerating annual growth from a recent nadir of 0.8% in the year’s first quarter.
The city’s crucial retail sector has suffered this year as China’s economic slowdown and a stronger local currency hit both sales and overall tourism. September bought news that retail sales had fallen for a 19th straight month.
However, this weakness clearly failed to hit overall growth as hard as economists had been expecting.
The US Dollar had been rising for much of the Asian session. Wire reports suggested that traders feel a Trump presidency will mean higher spending and higher inflation. This has resulted in higher Treasury yields and a broadly stronger greenback.
The Hong Kong Dollar didn’t get much respite from this more upbeat GDP report, which came after most Asian stock markets had closed. USD/HKD slipped back to 7.7562, from 7.7567 just before the figures, but remains higher on the day.
Hong Kong’s benchmark Hang Seng stock index had been weaker through the afternoon session there, reportedly on worries that GDP growth might miss the mark.
Future pressure on the local currency may be as much political as economic. Disputes and protests are ongoing about the right of Beijing to bar pro-independence legislators from taking office in Hong Kong.
USD/HKD: Still rising
Chart created using Tradingview
--- Written by David Cottle, DailyFX Research