Peg System Working WellThe Hong Monetary Authority (HKMA) need not put a lid on how much the Hong Kong dollar can strengthen by undertaking to sell Hong Kong dollars at a fixed rate, the Exchange Fund Advisory Committee Sub-Committee on Currency Board Operations said Wednesday, according to Chinadaily."Members noted that the present system, in which the HKMA managed its foreign exchange operations on the bid side by responding to offers from banks according to prevailing market conditions, was working well and was accepted by the market," the sub-committee said in a statement. "They concluded that on balance the present system should be maintained," it added. The sub-committee was established in 1998 to oversee the operations of Hong Kong's currency board, which pegs the Hong Kong dollar to the US dollar at a fixed rate of HK$7.80. The sub-committee is chaired by HKMA Chief Executive Joseph Yam and includes other senior HKMA officials as well as market professionals and academics. The HKMA currently helps prevent the Hong Kong dollar from weakening beyond the peg rate by offering to convert banks' Hong Kong dollar balances into US dollars at a fixed rate, known as the convertibility undertaking. Yam earlier said the HKMA was pondering an explicit undertaking to convert US dollars into Hong Kong dollars at a fixed rate, which would effectively put a floor and ceiling on the Hong Kong dollar in the spot market. |
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