Over the last ten years the Australian Dollar to Hong Kong Dollar (AUD/HKD) exchange rate has moved between highs of 8.5949 and lows of 4.6896.
The Hong Kong Dollar is in the top 15 of the world’s most traded currencies and has been involved in a ‘linked exchange system’ with the US Dollar since 1983. The connection between the Hong Kong Dollar and US Dollar was introduced in order to stabilise the Asian asset as Hong Kong’s future was negotiated by Britain and China.
Over the years Hong Kong’s central bank, the Hong Kong Monetary Authority (HKMA), has had to intervene in the currency market in order to maintain the peg. This intervention has involved tapping into the region’s exchange rate fund in order to devalue the Hong Kong Dollar.
The close tie between HKD and USD has an impact on the Hong Kong Dollar’s performance against its other currency rivals as a rallying US Dollar tends to mean a rallying Hong Kong Dollar and vice versa.
Subsequently, when the US Dollar surged during the height of the risk aversion triggered by the global market crash, the Australian Dollar to Hong Kong Dollar exchange rate weakened considerably.
The AUD/HKD exchange rate reached its highest point of the last ten years in 2011 but has since retreated. Factors which effect the Australian Dollar to Hong Kong Dollar (AUD/HKD) exchange rate include commodity price fluctuations (because of AUD’s status as a commodity correlated asset) developments in China (as China is one of Australia’s main trading partners) and news from the US (the world’s largest economy and a key influencer of market sentiment).