Will the Hong Kong dollar maintain it's peg to the US dollar?

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1 Min Read
150 words

The Hong Kong Monetary Authority (their central bank), has a mandate since 2005 to keep the Hong Kong dollar trading at HK$7.75 to HK$7.85 per US dollar.

However, since March 2022, the HK$ has been bumping along the outer bound, with the central bank making repeated interventions to keep it within range. See the following chart:


source

It's coming attack from hedge funds - see the following tweet from Bill Ackman of hedge fund Pershing Square Capital Management:

https://twitter.com/BillAckman/status/1595569030798139395

What are the consequences if it loses it's peg?

At stake are Hong Kong's status as a financial centre. Many Chinese companies go to Hong Kong to raise funding in Hong Kong dollars. Because of the peg, it's "just like" raising US dollars. When the peg goes, this benefit will go - they might as well raise finance in Shanghai.

As for non-Chinese companies, the Singapore dollar becomes more attractive.


Hong Kong is still a financial hub but I am not sure just how much it can last because I know that China has asserted it's control somewhat over the area. I am unsure what will happen if it loses it's peg but I am guessing people will either go to an alternative or seek refuge in the USD itself.

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