Hong Kong Dollar Gains as PMI Shows Expansion at Last
- Business activity in Hong Kong has expanded for the first time since early 2015, a closely watched survey showed
- The Hong Kong Dollar took a little comfort from this and rose further against a generally shakier greenback
- However, the survey suggests that Hong Kong’s economy remains mired by sluggish demand from mainland China
The Hong Kong Dollar gained against its US counterpart on Thursday after the release of data suggesting the first expansion in the territory’s private-sector business activity for nearly two years.
The Nikkei Hong Kong Purchasing Managers’ Index rose to 50.3 in December, from November’s 49.5, making it above the key 50 level for the first time since February, 2015. In the logic of PMIs any reading above 50 indicates a rise in activity levels.
However, last month’s very marginal gain was not driven by expansion in output or new orders. Instead, it was down to an increase in pre-production inventories as firms built up stocks in anticipation of more demand in the months ahead.
IHS Markit, which compiles the survey for Nikkei, said that Chinese demand for Hong Kong products and services “continued to wane” in December, with overall client appetite still sluggish.
“Improving external conditions and steadying growth in mainland China’s manufacturing sector may see Hong King business conditions stabilize in 2017,” its economist Bernard Aw said in a press release accompanying the report.
So, a crumb of comfort, then, for Hong Kong watchers, rather than a conclusive turnaround. Still, that was enough to see USD/HKD down to 7.6455 from 7.75503 just before the numbers saw daylight.
Hong Kong Dollar gets a boost:
Chart compiled using TradingView
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--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.