Two of the 10 most-traded currencies in the world, the CAD to HKD pair is an exotic instrument made up of the Canadian Dollar (CAD) and Hong Kong Dollar (HKD). The Bank for International Settlements reports that CAD accounted for 5% of all daily average trades in April 2019. HKD, in comparison, generated 4% – entering the top 10 for the first time since 2010.

The two currencies have been in use since the mid-19th century. But the close relationship both Canada and Hong Kong had with the UK meant it wasn’t until the 20th century that these Dollar currencies grew in stature. CAD first became a floating currency in the 1950s and then again in 1970. HKD is slightly different, however, as it has been pegged to the US Dollar since 1973.

In 1983, the Hong Kong Monetary Authority (HKMA) introduced a narrow trading band for HKD. While the currency is pegged at HK$7.8 to US$1, it can trade at a value between HK$7.75 and HK$7.85 due to a current trading band in effect since 2005. If the HKD hits the upper or lower limits, the HKMA – the de facto central bank – will intervene in order to stabilize the currency.

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 neighbor. 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.

Use this CAD to HKD chart to measure the value of the Hong Kong Dollar against the Canadian Dollar. OANDA’s pricing engine calculates the most current mid-market rates to provide a real-time overview of the CAD to HKD pair. Traders can use the historical chart data to inform their future positions – but it should not be used as any form of guarantee for future performance.