On Tuesday, the Hong Kong dollar approached the weakest end of its trading range against the US dollar, which increases the possibility of the city’s monetary authority intervening to support the local currency and maintain its peg to the dollar, amid weak demand for the currency and high US interest rates.
The Hong Kong dollar was trading at 7.8475 per US dollar by 03:25 GMT, approaching the 7.85 level, which represents the weakest end of the official trading range extending between 7.75 and 7.85 Hong Kong dollars per US dollar.
Under the peg system, the Hong Kong Monetary Authority is obligated to intervene when the exchange rate reaches 7.85, by selling the US dollar and buying the local currency.
This intervention withdraws liquidity from the banking system, pushing interbank interest rates higher, and helps boost demand for the Hong Kong dollar and keep it away from the weaker limit.
The current pressures come in light of the sluggish performance of the local stock market and weak investor inflows from mainland China, which has reduced demand for the local currency and kept interbank interest rates relatively low.
On the other hand, US interest rates have risen over the past two months, with markets reevaluating the possibilities of the Federal Reserve raising interest rates, which has increased the attractiveness of US dollar-denominated assets.
ANZ Bank analysts believe that Hong Kong will continue to maintain the system of pegging its currency to the dollar, as an effective mechanism for monetary stability, despite Beijing’s efforts to enhance the international use of the yuan.
The Hong Kong dollar reached its weakest point in the summer of 2025, which required repeated interventions from the monetary authority that continued until August.
But the bank's analysts do not expect a repeat of the sharp fluctuations that the currency witnessed between May and August 2025, when it quickly moved from the strongest to the weakest end of the trading range.
They saw the current decline as gradual and orderly, which reduces the risk of sudden disturbances.
As the currency approaches the level of official intervention, investors' attention will focus on the movements of the Monetary Authority, bank liquidity, and local interest rates, as major indicators of the market's direction during the coming period.
The continuous rise in the inflation index and the expansion of the poverty belt in Lebanon are responsible for erasing the “small” remainder of the balance of features of economic and livelihood recovery, after the war, with two major rounds in the last two years, destroyed most of the gains achieved in restoring positive growth in the domestic product, and the aspirations of the presidential and governmental era to pave the path out of the stage of monetary and financial collapses, and to revive the lines of communication and support with the regional and international communities.
With the digital increase in the overall components of the price index, and the rise in food inflation to an average of 20 percent during the current year, that is, at a rate of 2 percent per month, an updated report by the World Bank on the prospects for poverty in Lebanon reveals that the number of people suffering from crisis or emergency levels of food insecurity has risen to about 1.24 million people in 2026, compared to 874 thousand people in 2025, noting that the South and Nabatieh regions lead the regions with the most damaged.
These data do not reflect the entire scene of growing destitution and deficit in a country already afflicted by comprehensive collapses, as much as they portend a more severe deterioration in living conditions, which may lead, according to sectoral and union sources, to a wave of unrest and popular objections, putting the government before challenges that are more difficult and more comprehensive than its current clash with public sector employees and retirees, who in turn suffer from declining incomes in the face of the burdens of the rampant high prices in all areas of spending, which prompts them to resort to strikes. Intermittent, leading to relative paralysis in the work and tasks of ministries and institutions, which automatically affects the flow of treasury revenues in many vital facilities.
It is not fleeting, according to trade union sources among employers and workers alike, that the belt of extreme poverty or severe living crisis has expanded to include more than a quarter of residents, or about 250,000 families if the total number monitored by the World Bank is calculated on the basis of a family consisting of 5 people, while the actual numbers indicate a dangerous outbreak of the livelihood deficit extending to about 80 percent of residents, as a result of the sharp accumulation in the price index that approached 9 thousand percentage points, through rises. Successive and record-breaking events, most of which were achieved after 2020, that is, after the explosion of financial and monetary crises.
The World Bank highlighted the deterioration of the living conditions of families in Lebanon as a result of the escalation of hostilities in the spring of this year, as displaced families increased their reliance on informal support networks and dwindling financial resources, in light of the loss of their income and productive assets. While the Electricity Corporation's reduction in the capacity of factories operating on fuel contributed to forcing families to bear large increases in the prices of private electric generator subscriptions, which led to the erosion of their purchasing power and exacerbated the high-cost of living crisis.
The “catastrophic” description increases in accordance with the living conditions and the risks of runaway inflation, with the reality of the state’s financial deficit, and fears of an additional decline in treasury resources, in light of essentially “intractable” financial pressures, resulting from the monetary collapses that produced a gap of financial losses whose estimates exceed $70 billion, and which are followed by economic and construction war losses exceeding $27 billion, according to government and official estimates, which include direct and indirect losses resulting from the military escalation and the two wars. consecutively since the fall of 2023.
Among the pressing data is the World Bank’s expectations of a contraction in the gross domestic product by 6.4 percent during the current year, ending the fragile recovery gains recorded by the economy during the previous year, amounting to 4.2 percent, while at the same time indicating a worsening of inflationary pressures during the first half of the year, as the annual inflation rate increased to 17.3 percent, compared to 14.6 percent in 2025.
In a positive outlook, the World Bank report notes that, despite the financial pressures resulting from the conflict, public finances continued to record a surplus of one billion dollars, equivalent to 2.5 percent of the gross domestic product, achieving an annual increase of 32 percent until the end of the fifth month, noting the impact of the increase in government revenues by 26.6 percent on an annual level, supported by the increase in revenues collected from the consumption tax on fuel. In parallel, public expenditures rose by 23.7 percent, as a result of an increase in the salaries of public sector workers, in addition to an increase in capital expenditures, hospitalization expenses, and treasury advances related to the conflict. In contrast, the prices of water, electricity, gas and other types of fuel increased by 25.3 percent annually, and the cost of transportation increased by 29.5 percent until the middle of this year.
As for the monetary level, the report indicated that the stability of the exchange rate of the national currency against the US dollar is linked to the scarcity of liquidity in the pound, at a time when the Central Bank’s foreign currency reserves were observed to decline to $11.6 billion in mid-August, which is sufficient to cover about 6.6 months of imports, compared to $12.1 billion in mid-February, with the Bank of Lebanon forced to use part of its reserves to meet its foreign currency obligations, in conjunction with... Decreased availability of foreign currencies in the market.
As for the external sector in Lebanon, the report indicated an increase in the trade balance deficit by 8.8 percent on an annual basis, reaching $10.2 billion by the end of July, reflecting a decline in exports by 16.6 percent and an increase in imports by 4.2 percent, as a result of the conflict-related disturbances that negatively affected export activity, coinciding with the rise in oil prices and insurance premiums. It also points out that the value of energy imports increased by 9 percent, to about $3 billion, during the first seven months, despite the decrease in imported quantities by 31 percent, which imposed additional pressure on the current account balance, which was and is still witnessing a deterioration affecting currency flows and reserves.
