The Hong Kong economy, which has strengthened over the past year, is now in a better position to absorb possible negative effects on consumption and investment a rise in US interest rates could bring.

The latest Currency Board Operations report said during the period March 26 to April 23, global recovery continued to gather momentum.

It said the Mainland had taken measures to address rapid growth in fixed-asset investment and bank credit.

The risks to monetary and financial stability in Hong Kong has continued to recede, and the near-term growth outlook is positive, it added.

Convertibility undertaking activated on April 30

The Hong Kong dollar has gradually moved back to a level close to the official rate of 7.8 during the course of the period under review.

Outside of this period, the convertibility undertaking had been activated once, on April 30. The aggregate balance continued to be high, at around $54 billion.

Short-term interest rates remained low, but long-term rates have increased on expectations of monetary tightening in the US.

It observed that Hong Kong dollar forward points continued to be at a discount, which suggested that sentiment towards the Hong Kong dollar was still strong.