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Dollar peg is critical to Hong Kong amid threats from US, China worries

The HKD is pegged in a narrow range of 7.75-7.85 to the US dollar. The Hong Kong Monetary Authority (HKMA) buys and sells the currency at either limit to maintain the range

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There are fears that escalating U.S.-China tensions could result in the United States potentially limiting Hong Kong banks' access to U.S. dollars, thus jeopardising the peg.

Reuters Hong Kong

3 min read Last Updated : Jul 10 2020 | 12:23 PM IST

China's national security law for Hong Kong and moves by the United States to begin withdrawing privileges enjoyed by the city under US law have unsettled investors.

They have also raised fears about the stability of the Hong Kong dollar's (HKD) 36-year old peg to its US counterpart, prompting local officials to issue several reassurances.

HOW THE PEG WORKS

The HKD is pegged in a narrow range of 7.75-7.85 to the US dollar. The Hong Kong Monetary Authority (HKMA) buys and sells the currency at either limit to maintain the range. Buying HKD boosts it by reducing its availability and raises the costs

Topics : Hong Kong Hong Kong stocks Asian markets

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