The View | Here’s how to play the strong HK dollar if your kids are studying abroad

Many families in Hong Kong send their children abroad for school, and, as a result, expose their household financial positions to substantial foreign exchange risk. The wind is currently at our backs, as the link to a strengthening US dollar has increased Hong Kong’s purchasing power in countries such as the United Kingdom, Canada and Australia.

Yet there is a question of how long these beneficial terms of trade will last. Should Hong Kong households with younger kids, for example, be loading up on certain foreign currencies now, in case the terms are not so attractive when their little scholars finally head off to boarding school or university? Or will Murphy’s Law ensure that if they do take such precautions, the markets will inevitably move against them?

This is a personal question for me. I have a teenaged daughter who is half-Australian, and very impressed with the country’s higher-education credentials (i.e., the beaches). The Australian dollar has fallen by about a third from recent year peaks, so seems cheap. Will it still be “cheap” in two years?

Aye, it may get cheaper. “The China-driven commodity cycle is over; further weakness in commodities is not a reason to own them,” JPMorgan said in its 2016 outlook. As such, the bank remains bearish on many commodity-linked currencies, and seems to have a particular bias against the Aussie. “Our current preferred implementation for 2016 is Australian dollar shorts,” the report said.

Predicting Australian dollar movements is notoriously tricky, however. If looked at rationally this is a country that should be in some Mad Max post-bubble apocalypse, hunting kangaroos for dinner, and too debt-burdened even to afford sunblock. Instead, the country’s has simply exchanged a commodities bubble for one in property. Interest rates are unlikely to go lower; the next move might even be up. As someone who may have to make large outlays in Australia’s foreign exchange market in future, it is tempting to wade in now, purchasing the equivalent of at least one or two terms worth of tuition costs.

Those with plans to study in Canada might have even more motivation to take pre-emptive action in the forex arena. The Canadian dollar is down some 40 per cent from recent peaks, in no small part due to the shocking price falls in oil. Bank of America Merrill Lynch, for one, believes the Canadian dollar is “oversold and would correct if oil prices stabilise.”

Then there is the UK, a still larger destination for Hong Kong students studying abroad. Sterling has not come close to regaining pre-Global Financial Crisis levels, in part because of the Bank of England’s dovish monetary policies under its Canadian governor, Mark Carney.