The financial sector
- 6.
In early January 1995, following the sharp depreciation of the Mexican peso, there were signs of speculative selling pressure on several Asian currencies, including the Hong Kong dollar.
The Hong Kong Monetary Authority began tightening liquidity in the interbank market on January 12, and the action succeeded in fending off speculation promptly.
The market exchange rate of the Hong Kong dollar against the US dollar bounced back from a low of HK$7.769 to US$1 on January 12 to around HK$7.734 to US$1 by January 21.
Since then, the exchange rate held generally steady and closed the first quarter at 7.733. However, reflecting the weakening of the US dollar, the trade-weighted Effective Exchange Rate Index of the Hong Kong dollar fell to 117.9 at the end of March 1995, from 121.4 at the end of 1994.
In February, following closely the rise in the US Federal discount rate and the Federal funds rate, and the corresponding adjustment in the bid and offer rates under HKMA's Liquidity Adjustment Facility, those deposit rates administered by the Hong Kong Association of Banks and the best lending rate were raised by 0.5 of a percentage point.
Hong Kong dollar deposits grew fairly modestly during the first quarter.
The growth in Hong Kong dollar loans also remained moderate, reflecting in part the effect of the successive rises in interest rate since March last year.
Updated forecasts
The GDP and price forecasts for 1995 have been reviewed by individual components. The updated forecasts are summarised in the table annexed.
In the external sector, the forecast growth rate of re- exports in real terms in 1995 is kept unchanged at 16%.
The
In the first quarter, re-exports already grew by 19% in real terms. corresponding forecast growth rate in real terms of domestic exports is revised upwards to 5%, from the earlier forecast of 2%.