Well, much as I like predicting the disappearance of the
Hong Kong dollar I’ve so far been very wrong ( although to be fair it is of
less import than all those who have been continuously, and equally
incorrectly, predicting the collapse of
the Euro!). Nevertheless I did spot that the impact on the HK$ in the last
quarter of 2016 were likely to be externally triggered and in fact it was the
US elections rather more than the China
economy that created the conditions for concern over the peg at this time.
Anyway, I was almost
tempted to shelve the whole Hong Kong thing as a relic of the past and move on
to more interesting countries. But once again, for completeness, here we go:
Conditions are good for the currency in January and February
2017. Indeed the only difficulties are from external partner currencies. It is
hard to stay pegged or within ranges when your partner currency is all over the
shop.
The conditions continue through to May and in fact
situations become somewhat more concrete at this time with some policy actions
required.
June to August are better months. Although there is some
risk of speculative action.
September to November are more complicated. There is once
again external pressure and some big movements in funds globally that affect
the currency’s markets.
December sees more pressure on the partner/US$ peg. But it
also sees a shift in sentiment generally.
2018
March and April are much more interesting as long term
conditions affect the local people and there is a lack of direction which
suggests that the general currency situation is untenable. There are more
speculative actions.
May to July is a peak time for those concerned about the
stability of the dollar peg. There is real instability now.
The situation is critical around August and September. The local
people start to respond by trading the currency to protect their assets Though
there is just enough faith to see things through then.
October to November become even more interesting as the
situation with population and investors becomes more unstable.
It is likely that some change will have to be made by
December.
2019 is a different type of year. It starts with what looks
like more speculation.
But conditions are somewhat more stable than in 2018
In fact, although there are ongoing global events which
continue to shake things up in March and
April, there does not seem to be much development at the local level.
May to July is more interesting. Rate changes are very
likely now.
And there is a general concern about inflationary
conditions.
August to October sees a slight lull in the trends.
Increasingly I am noticing a common thread across all the
predictions that the latter part of 2019 represents a month or so of wait and
see.
November and December, then, see a definite change in the
tone of the currency environment.
Some further brief speculation in the HK$ is still possible.
2020
January and February 2020 see a greater intensity in global
pressures on value.
March to June sees this escalate further. There may be some
restriction on trade in the currency then
July to October sees a mix of actions to balance things,
including rate changes, possible revaluations and re-defining of pegs etc.
November is key to this reformulation.
Leaving December as the month when a new environment starts
operating.
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