“While risk management is important, let’s not be swayed by unfounded concerns,” Eddie Yue Wai-man said in an article posted on the authority’s website on Thursday.
“And let me reiterate, we have no intention, and we see no need to change the Linked Exchange Rate System [LERS]”
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Yue’s reaffirmation of the peg comes after media commentators expressed concern about the outlook for the LERS, as tension between the US and China is expected to escalate after Donald Trump’s return to the White House later this month.
“Despite the recent interest in LERS and even speculation regarding potential geopolitical shocks, the Hong Kong dollar market has continued to operate smoothly in accordance with the design of the LERS,” Yue said.
The Hong Kong dollar is linked to the US dollar at a fixed exchange rate of HK$7.80 per US dollar, and the HKMA intervenes to make sure the rate stays within a band from HK$7.75 to HK$7.85.
Eddie Yue Wai-man, CEO of the Hong Kong Monetary Authority, pictured at SCMP’s Times Square office in Causeway Bay on October 18, 2024. Photo: Jonathan Wong
The strong US dollar and the strength of the Hong Kong dollar against other major currencies, has led many Hongkongers to travel to and spend in mainland China and other markets, a move that has hurt local retailers.
Some commentators have called for pegging the Hong Kong dollar to the yuan instead of the US dollar to reflect the city’s ties with the mainland, while some warned that the Trump administration could introduce measures that stress the peg.
Some of these comments “reflect misconceptions due to a lack of understanding about the system, and others piece together unrelated news fragments that present an inaccurate picture”, Yue said.
“Indeed, many market experts have endorsed the LERS as the most suitable monetary arrangement for Hong Kong, and it enjoys robust credibility in the financial markets.”
Yue downplayed worries over geopolitical tensions, pointing out that the authority is well prepared for any challenges.
“Hong Kong has sizeable foreign reserves of over US$420 billion, equivalent to about 1.7 times our monetary base, ensuring the smooth functioning of the peg at all times,” he said.
“The systemic stability of the LERS is highly regarded in the financial markets, and the International Monetary Fund has consistently viewed it as the most suitable monetary system for Hong Kong.”
