Financial encyclopedia

Yesterday, the exchange rate of the Japanese yen against the Hong Kong dollar hit a record low, falling below a six-year low, and it was tested at 4.944. Under the linked exchange rate, the appreciation or depreciation of the Hong Kong dollar against other currencies is completely controlled by the exchange rate of the US dollar against that currency. Therefore, even if the local economy has been experiencing frequent negative news recently, Hong Kong people can still take advantage of the "low water" of the yen to buy yen for tourism investment.

What is the linked exchange rate?

On October 17, 1983, the Hong Kong Government introduced the linked exchange rate system, and the Hong Kong dollar was pegged to the US dollar at the level of 7.8 Hong Kong dollars to 1 US dollar. The HKMA provided an exchange guarantee, promising to sell Hong Kong dollars at the strong exchange guarantee level of HK$ 7.75 to US$ 1 and buy Hong Kong dollars at the weak exchange guarantee level of HK$ 7.85 to US$ 1. Ensure the smooth operation of the currency and foreign exchange markets.

What are the advantages of the linked exchange rate?

The US dollar is almost universal, and the trade and financial transactions of various countries are mainly in US dollars.

To provide a stable monetary pillar for Hong Kong and reduce the foreign exchange risks faced by importers, exporters and international investors.

The closeness of the economic cycle can reduce the volatility brought by the economic cycle.

The crisis of currency devaluation can be avoided

What are the restrictions on the linked exchange rate?

Local interest rates generally follow the trend of American interest rates, so we cannot use monetary policy to stimulate economic growth or curb inflation, which weakens Hong Kong's ability to rectify and adjust the economic cycle.

The appreciation or depreciation of the Hong Kong dollar against other currencies is completely controlled by the exchange rate of the US dollar against this currency. If Hong Kong is confronted with the impact of overseas or local events such as the devaluation of competitors' currencies or the economic recession in export markets, it cannot adapt to the changes in the environment through exchange rate depreciation, thus affecting foreign trade and the balance of payments.