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The exchange rate between the Hong Kong Dollar (HKD) and the Euro (EUR) has experienced notable fluctuations in 2025. Starting the year at a relatively strong position, the HKD has since depreciated against the EUR, reaching its lowest point in late June. This report examines the trends, potential causes, and implications of these movements.

Exchange Rate Trends in 2025

In January 2025, the HKD/EUR exchange rate peaked at 0.1252 EUR per HKD on January 2. The average exchange rate for the month was approximately 0.1240 EUR per HKD. However, a downward trend emerged in the following months. By March 31, the rate had declined to 0.1191 EUR per HKD, and by April 30, it further decreased to 0.1147 EUR per HKD. The depreciation continued, with the rate reaching 0.1137 EUR per HKD by May 31. The lowest point was recorded on June 27, when the exchange rate fell to 0.1087 EUR per HKD. (exchange-rates.org)

Factors Influencing the Exchange Rate

Several factors may have contributed to the HKD's depreciation against the EUR:

1. Economic Performance: Differences in economic growth rates between the Eurozone and Hong Kong can influence exchange rates. If the Eurozone's economy outperforms Hong Kong's, the EUR may strengthen relative to the HKD.

2. Monetary Policies: Divergent monetary policies between the European Central Bank (ECB) and the Hong Kong Monetary Authority (HKMA) can impact currency values. For instance, if the ECB tightens monetary policy while the HKMA maintains a more accommodative stance, the EUR could appreciate against the HKD.

3. Trade Balances: A trade surplus in the Eurozone or a trade deficit in Hong Kong can lead to increased demand for the EUR, causing it to appreciate against the HKD.

4. Investor Sentiment: Global events and geopolitical tensions can affect investor confidence, leading to capital flows that influence exchange rates. If investors perceive the Eurozone as a safer investment destination compared to Hong Kong, demand for the EUR may increase, strengthening it against the HKD.

Implications of the Exchange Rate Movements

The depreciation of the HKD against the EUR has several implications:

• Trade: Hong Kong imports from the Eurozone become more expensive, potentially increasing costs for consumers and businesses. Conversely, Hong Kong exports to the Eurozone may become more competitive due to lower prices in EUR terms.

• Investment: Investors holding assets denominated in EUR may see increased returns when converted back to HKD. However, Hong Kong investors looking to invest in the Eurozone may find it more costly.

• Tourism: For Hong Kong residents traveling to Eurozone countries, the depreciation means higher expenses in HKD terms. Conversely, Eurozone tourists may find Hong Kong more affordable.

Conclusion

The HKD/EUR exchange rate in 2025 has shown a clear downward trend, with the HKD depreciating against the EUR. This movement is likely influenced by a combination of economic performance, monetary policies, trade balances, and investor sentiment. Understanding these factors is crucial for businesses, investors, and policymakers to navigate the implications of currency fluctuations effectively.