Friday, June 22, 2018
Martin Hennecke

Wait for catalysts to fuel further rallies
The foreign exchange market is one of the most difficult places for individual investors to make a profit, with numerous professional traders competing against each other. More importantly, forex rates are affected by many economic, fiscal and political factors.

Recently, there were media reports about students failing to get British visas on time before the start of their studies. Why are there many local students who wish to study overseas, especially in Britain? Many parents are perhaps starting to worry as student unions of local universities raise the issue of Hong Kong independence. But the pound exchange rate could be another factor. Since 2007, the pound has kept falling against the US and Hong Kong dollars. One pound fetched US$2.11 in November 2007. But last October, the exchange rate fell at one point to US$1.145, or an accumulated 45 percent plunge by the pound in nine years.

The pound has since rebounded and one pound was worth US$1.328 as of yesterday after Britain reported a higher inflation figure and amid expectations that the US Federal Reserve will moderate rate hikes this year and next.

The pound is tipped to rise further to US$1.40 in the mid term though Brexit talks may pose uncertainties from time to time. During the pound's downtrend between 2007 and 2016, it was hardly a surprise to see the currency rebound by 2,000 to 3,000 basis points at certain periods.

The Hang Seng Index still faces a major resistance at 28,000 points. Investors need to wait for fresh catalysts to fuel further rallies.

Dr Check and/or The Standard bear no responsibility for any decision made based on this column.

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