Jake's View | HKMA prays for deliverance from loose money
With the HK dollar's currency peg under strain, the Hong Kong Monetary Authority must be hoping for an end to US quantitative easing
If they are not quite down on their knees at the Hong Kong Monetary Authority (HKMA), there is a least a silent prayer emanating from that tall office block with the set of roof claws from the movie Alien.
Dear God, runs that whisper, please let it be true that this year will see the promised end of Ben Bernanke's quantitative easing programme in the United States and please let interest rates start to go up now and please could we see a little strength in the US dollar, amen.
The Hong Kong dollar is hardly under attack at the moment, but the peg to the US dollar is under strain again, which is never a comfortable time for the HKMA.
First some history. It is not quite true that we have a peg at HK$7.80 to US$1, at least not for some years. As the first chart reveals, what we actually have is a convertibility undertaking.
It was adopted in 1998 at HK$7.75, which was the HKMA's way of saying that things had become a little ridiculous when an official HK$7.80 peg had rarely seen a spot exchange rate nearer that peg than HK$7.75 for six years.
The next move our monetary authorities made was to push the market rate slowly back to the official HK$7.80. There they stopped, rubbed their hands and said, "job done."