With this currency peg in place, HKD often displays no strong unique correlation with any other popular forex options. This peg also means the CAD to HKD rate is impacted by the US Federal Reserve. The HKMA often looks to keep in lock-step with the Fed when interest rates are cut or increased. But it can struggle to do so with a high level of liquidity in its banking sector.
Canada’s close trading and political relationship with the USA also has an influence on the CAD to HKD pair. Unlike the HKD, CAD is a free-floating currency and can show significant volatility. But its value can also be influenced by Fed decisions due to Canada’s close trading relationship with its neighbour. The US market accounts for three quarters of all Canadian exports.
Demand for Canadian goods is exposed to any US economic concerns. If this demand falls, the effect can be seen in the CAD to HKD rate – as well as any other trades involving the Canadian Dollar. For traders, however, the US isn’t the only export concern in terms of CAD to HKD news. As a commodity currency, CAD’s value is also driven by global demand for commodities.
It is also not uncommon for trade policy in countries such as China (which includes Hong Kong) to cause movement in the CAD to HKD rate. Other factors that traders should also consider are key economic performance indicators such as GDP data, retail sales and employment rates. For Hong Kong, Chinese government policy and the political climate are to be noted too.