The Legislative Council held a Financial Affairs Panel meeting today (May 4), where Hong Kong Monetary Authority Chief Executive Eddie Yue stated that the Linked Exchange Rate System provides stability for Hong Kong and reiterated that there is no intention to change it.
When a Legco member raised the question of whether consideration would be given to optimising the linked exchange rate system by pegging the Hong Kong dollar to a basket of currencies, including the renminbi, Mr Yue said global financial market investors still use the US dollar as their base currency. With the Hong Kong dollar pegged to the US dollar, the Hong Kong market remains highly attractive.
Mr Yue also noted that exchange rates fluctuate daily, and from a technical perspective, pegging the Hong Kong dollar to a basket of currencies would be extremely difficult to operationalise. Changing the peg mechanism would also have a significant impact on the market, and issues such as whether confidence would be undermined would need to be considered.
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