Weaker Hong Kong dollar to boost tourism and lower cost of services: economists

Recent weakness in the Hong Kong dollar against some currencies in the region has made the city more appealing to inbound tourists while lowering imported costs, according to economists and industry leaders.

The Hong Kong dollar, pegged to the US dollar, weakened against a basket of currencies as reflected in the US dollar DXY Index, dropping 4 per cent in the first quarter.

The drop in the local currency occurred even though it appreciated strongly against the US dollar in the past four days, prompting the Hong Kong Monetary Authority to intervene for the third time since Saturday.

“A weaker Hong Kong dollar will help boost tourism and bring more economic benefits to the city than anything else,” said Billy Mak Sui-choi, associate professor at Baptist University’s department of accountancy, economics and finance.

He explained that the local currency peg to a weakening US dollar would lead to the Hong Kong dollar’s depreciation against other currencies, resulting in cheaper prices for local professional services.

“This will help boost tourism, creating a stronger incentive for tourists to come to Hong Kong and global investors to seek our professional services such as accounting and legal services.”

Mak pointed out that the inflow of overseas capital would stimulate more economic activity in Hong Kong as banks would have a tendency to reduce interest rates driven by greater liquidity flows.