As expected the US Federal Reserve raised the key rate by 0.25 percent last week even as it announced that it expects its balance sheet to come down in the second half of the year.
Hong Kong does not necessarily track rate rises in the US as the balance in the local banking system remains high.
A note of caution though in this area. If accumulated funds in the local banking system are exchanged into US dollars and used in carry trade activities, the telegraphic transfer rate may rise to 7.83 or even 7.85 to the greenback in the short term. This could exert upward pressures on local prime rates. People should therefore not be overly optimistic on Hong Kong interest rates.
One of the most worrying issues is the US decision to withdraw from the Trans Pacific Partnership Agreement. Japan frets over this policy shift and it has begun to doubt if the US remains its best partner.
Some analysts say China can benefit as its ties with Japan may improve amid this uncertainty. But due to historical issues, Japan may not depend on China unlike what it does to the US.
Japan is now the largest buyer of US Treasuries. But if it realizes eventually that it can't depend on the US for protection, it might question the merits of continuing to hold a large volume of US Treasuries.
Andrew Wong is an independent commentator.