Speculation is growing that hong kong could do away with its three-decade old currency peg to the us dollar--a possibility the city's government has dismissed does the peg distort the hong kong dollar is the currency overvalued or undervalued can the hong kong government defend the peg. “hong kong dollar peg under threat from speculative attack” makes a suitably eye-catching headline but despite the “massive” 1% fall in hong kong currency's value against the us dollar so far this year, hong kongers can relax the peg is in no danger hong kong dollar us peg photo: hkfp remix. Initially speculation mounted that a weaker renminbi would force hong kong to devalue its currency as well in the days thereafter the hong kong dollar whipsawed within its narrow band against the us dollar, but the fluctuations eased when it became clear that china had no plans for further steps.
In hong kong, the currency board requires that the monetary base be fully backed by foreign currency held in the exchange fund under the linked exchange rate system, the hkma can intervene to manage the currency between a band of 775 to 785 to the dollar by expanding and contracting the. Because no discussion of global dollar pegs and entrenched fx regimes would be complete without mentioning the hong kong dollar.
De-peg prof yam's comments came as a surprise because he was one of the architects of the us dollar peg and has been a stalwart defender of the policy in his new paper , he outlined several options, including increasing the level at which the hong kong dollar would be allowed to trade against the. The weakening of the hong kong dollar forward rate to below 785 does not mean that the market is speculating on an imminent depeg of the hong kong while the hong kong dollar interbank rates have risen, it should be noted that the interbank rates are rising from near-zero levels and their current. The hong kong dollar has fallen to its weakest level since the china-inspired turmoil of january 2016 as abundant liquidity continues to create a end of its permitted hk$775 to hk$785 trading band — which would force the hong kong monetary authority to support the currency and potentially produce.
Hong kong's monetary authority spent hk$996 billion (us$127 billion) to prop up the city's currency last week, but while the move is no cause for alarm, people should not expect the low-interest rate environment in the city to last forever, according to a blog by the financial secretary the hong kong dollar.
This in-depth report is the second that discusses the possibility of a de-pegging of the hong kong dollar (hkd) to the usd at the same time, accessing the impact of a de-peg to hong kong local companies and finding the most vulnerable part of the system can increase investors' chance to succeed. But other businesses believed the weaker local currency, which hit a three- decade low against the us dollar on monday, would have little real or long-term impact as the fluctuation was marginal a currency peg against the greenback since october 1983 has kept the hong kong dollar relatively stable. 95 weakness in hk currency board system and trading opportunities in betting a de-peg of the hong kong dollar those whom the gods wish to destroy, they first make mad—euripides section the arguments why the hong kong monetary authority (hkma) should maintain the current system are.
Over it's history, hong kong has gone from a backwater trading port to one of the financial trade capitals of the world in a relatively short period of time for over 30 years, hong king's currency has been pegged to the us dollar with hope that the reserve currency would bring monetary stability.
He also said that currently, the hong kong dollar almost has no linkage with the yuan, he told the global times on wednesday on the condition of anonymity xi also said that in the long run, the hong kong dollar must de-peg from the us dollar and peg with the yuan, as hong kong and the mainland's.