Euro (EUR) is used in most EU countries, so the currency is very liquid and popular among traders.
Due to the low impact of economic factors and the possibility of conducting a comprehensive technical analysis, this financial instrument does not lose its relevance even during economic crises and unstable markets.
Hong Kong Dollar (HKD) is the national currency in Hong Kong. Despite its small size, this state is a real economic giant.
The country’s economy is based on international trade and export of chemical products. Hong Kong is one of the leaders in the number of foreign investments.
This is due to a zero level of corruption and unique monetary policy. This is the only country in the world where the National Bank does not resort to changes in interest rates to regulate the exchange rate.
In Hong Kong, they are generally absent; instead, the National Bank uses special corridors, within which it limits exchange rate fluctuations. This data was not disclosed to the public, due to which it is quite difficult to predict the movement of HKD.
As for the economic factors affecting the strength of the Hong Kong dollar, there are not so many of them. Since Hong Kong is the largest port in Southeast Asia and one of the largest shipping harbors in the world, international sea freight turnover has a strong influence on HKD.
All these factors make the EUR/HKD pair not the most popular among traders. On one hand is the euro, which depends purely on manipulations in the banking sector, on the other – the Hong Kong dollar, which is gaining strength in the wake of the development of international trade.
If we compare these factors, it will become obvious that currencies are getting stronger and weakening under similar circumstances. Nevertheless, traders can take advantage of the high volatility of the pair and try to profit from it.
Hong Kong is geographically close to China. This circumstance determines the interconnection of the economies of these countries. Moreover, many Chinese corporations open Hong Kong branches or completely transfer their companies under the jurisdiction of this country.
This circumstance is associated with transparent tax policy and legal protection of companies. Given that the Chinese economy claims to be second in the world, second only to the United States, it is obvious that any problems in China will lead to a weakening of HKD.
You also need to understand that Hong Kong is 95% dependent on imported raw materials and energy. Besides the fishing industry, other subsistence farming sectors are not developed in the country. We are not talking about mining.
This makes the country’s economy dependent on prices for raw materials and oil. Decreasing quotes for these product groups strengthens HKD. But in general, the above factors do not affect the currency too much, since their changes are seasonal, temporary.
The main problem for traders is a lack of understanding about the corridor in which the HKD exchange rate will be supported. In 2018, the Hong Kong bank let go of the exchange rate to a record value of 9.4 HKD for 1 EUR, but in just a couple of months, the value returned to the standard level of 8.4 HKD. What is connected with such a sharp leap is not known for certain.
Against this background, the euro does not look like the most interesting cross-pair. The exchange rate directly depends on the decision of the European Central Bank on interest rates. When making a decision, a financial institution focuses on GDP indicators in the EU and individual countries, inflation, consumer price index.
All these indicators are very indirectly dependent on the Asian sector of the economy since most of the EU trade occurs within the eurozone and with its closest neighbors.
The only opportunity for traders to make money with this instrument is to anticipate when the ECB will decide to lower the interest rate. A stable HKD against this background will strengthen, which will create a small trading corridor.
Trading the EUR/HKD pair belongs to fairly complex mechanisms that require not so many global skills and knowledge as simple luck. Therefore, the pair is rarely chosen.