The Hong Kong Dollar’s ‘linked exchange system’ with the US Dollar means that fluctuations between the pair are kept within a certain range. As the Hong Kong Dollar has no such ties with the Australian Dollar, movement in the HKD/AUD exchange rate can be more violent.
The pairing has certainly experienced some marked volatility over the past decade, with HKD/AUD spiking to a high of 0.2132 back in late 2008 as investors responded to the Lehman Brother’s bankruptcy and subsequent chaos in global markets.
The Hong Kong Dollar failed to hold this level however and as the ‘Great Recession’ of 2011-2012 engulfed the US, the HKD-USD peg meant that the weakening of the US Dollar resulted in a similar slide in Hong Kong Dollar demand.
The HKD/AUD exchange rate hit a low of 0.1163 in 2011 and struggled around that level until 2013.
However, as the US economy began to gather momentum and the US Federal Reserve started to consider introducing tighter fiscal policy the Hong Kong Dollar steadily climbed against its Australasian peer.
A weakening in the Chinese Yuan also bolstered the Hong Kong Dollar and helped it firm against the ‘Aussie’.
Due to the Hong Kong Dollar’s almost unique position among global currencies, the factors which impact how the currency performs are slightly different to those affecting currencies like the Australian Dollar, US Dollar and British Pound. Because HKD is kept in such a tight trading band with the US Dollar, domestic ecostats (like growth and consumer price data) has a comparatively limited impact.
HKD movement is therefore more likely to occur in response to news from China and the US as well as in reaction to global economic developments.