| Abstract | After reaching a relatively low value in the first quarter of 1995, the US dollar strengthened considerably against major currencies over the past 22 months, reflecting more rapid economic growth and widening interest differentials over other industrial countries. With economic conditions remaining favourable, the US dollar, and therefore, the Hong Kong dollar under the linked exchange rate, is likely to stay strong in the near term. While a strong Hong Kong dollar would help lower import costs and export prices, export volume growth would be affected by the loss of competitiveness in overseas markets given the labour-intensive nature of the products. In the event, total export growth would at best average only 10% in 1997. A strong dollar would help reduce inflationary pressures by lowering import prices. Despite the rebound in economic activities, inflation is expected to average 7% in 1997. |
|---|
