Hong Kong’s US-dollar peg a key success factor and will stay: John Lee

Hong Kong will maintain its currency’s peg to the US dollar, the city’s leader has said, identifying it as a key success factor and rejecting calls to abandon the link amid escalating geopolitical tensions.

But this did not mean the city was solely reliant on the peg for its financial system, and Chief Executive John Lee Ka-chiu pledged to strengthen Hong Kong’s dominant role as a global offshore renminbi business centre, promising more product diversification.

Lee’s reassurance came after multiple interventions by the city’s de facto central bank recently to defend the peg as the Hong Kong dollar hit the higher end of its trading band, triggered by equity investment activities and the appreciation of regional currencies against the US dollar.

“Hong Kong’s link with the US dollar has proven to be one of the fundamental success factors,” he told the Post in an interview, noting the peg had always come under pressure, especially in uncertain times.

In a series of interventions last month, the Hong Kong Monetary Authority (HKMA) spent HK$129.4 billion to buy US$16.7 billion worth of US dollars to weaken the local currency, which had hit the strong end of its trading band.

The move came amid a wave of capital inflows, driven by increased investor interest in Hong Kong stocks and steady southbound buying from mainland Chinese investors via the Stock Connect mechanism.

  

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