The HK dollar and exchange markets remained stable in August, according to the Exchange Fund Advisory Committee.

Supported by improved confidence in Hong Kong's economic outlook and inflow of funds into equities, the HK dollar forward points have eased to below 100 pips since late August.

Meanwhile, interest rate spreads between the HK and US dollars also declined further.

The committee said Hong Kong's economic activity had rebounded since the end of May, and supported by the continued strong growth in exports of goods and services including an upturn in inbound tourism, was likely to continue to recover for the remainder of the year.

Local financial market conditions have also improved markedly in line with overseas developments.

However, the recent debate on the Mainland's exchange rate regime and domestic fiscal developments could impact the HK dollar exchange markets.

The committee noted an analysis on market expectations of real GDP growth, which said there is an increasing trend for central banks to downplay point forecasts of GDP growth and inflation, but to aim to present a full picture of the extent of uncertainty and the balance of risks facing the economy.

The report found that as concerns about SARS receded, tourism and the retail sector had rebounded to various degrees in the region, and were likely to continue to grow for the remainder of the year.