USD/HKD likely to trade lower towards 7.82 going forward as U.S.-China trade talks enter a critical point, says Scotiabank

The USD/HKD currency pair is expected to trade lower towards 7.82 going forward as the trade talks between the United States and China is entering into a critical point at the 10th round of negotiations, scheduled to kick-start in Beijing on next Tuesday, according to the latest research report from Scotiabank.

HKD liquidity conditions have been tightening as indicated by narrowing yield advantage of the USD and rising EF bill yields. Meanwhile, it is reckoned that the HKD funding costs will be increasingly susceptible to market turmoil given shank HKMA aggregate balance.

In addition, mainland Chinese investors are likely to turn net buyers of Hong Kong shares as the Fed is expected to remain in a wait-and-see mode in the months ahead. Hong Kong’s initial public offering (IPO) market has been delivering the best returns in years, the report added.

According to SCMP, eleven companies that sold IPOs worth of at least USD 100mn advanced by an average of 11 percent one month after first-day trading, the biggest gains for any first quarter in four years. It will improve market sentiment if the US and China reach a trade deal in late May or early June.