Hong Kong and Beijing are feeling the impact of the continued wrangling over when and in what form European Economic and Monetary Union (EMU) will take place, a new survey shows. While the EMU project may seem distant, the Economist Intelligence Unit (EIU) has discovered events in the run-up to the single currency, scheduled for January 1999, have had an adverse impact on the cost of living in Hong Kong. According to the EIU's Worldwide Cost of Living Survey, the territory found itself swept up the rankings to become the fifth most expensive city in the world from 12th last year. Beijing, which was ranked 30th last year, has moved to 16th place. The reasons for the shift in the rankings lie in the foreign exchange markets, which have been periodically gripped by the EMU argument. That has caused several European currencies to weaken against the United States dollar. Given that the Hong Kong dollar is pegged to the US dollar, this has proved crucial for determining how expensive Hong Kong is, particularly for foreign nationals working in the territory. Currency speculators have caused several European currencies to weaken as they have bought into so-called safe-haven currencies, such as the US dollar, the deutschemark and sterling. Consequently, those currencies that have become weaker have made their cities cheaper. Zurich and Geneva, which both used to be permanent features at the top-end of the scale, are now less expensive than both Hong Kong and Beijing. Virginia Thorpe, one of the authors of the report, said another explanation for Hong Kong and Beijing's rapid rise up the rankings was the recent strength of the US dollar. She said the prospect of long-term interest-rate rises in the US had caused a surge in US dollar-denominated assets, which in turn had fed through to the relative value of the Hong Kong dollar. What effect EMU will have on Hong Kong and Beijing once it is finally effective is still uncertain. It will depend on the strength of the euro - the new currency which replaces the currencies in the EMU zone. Should the euro be weak, it could mean Hong Kong will remain expensive for foreigners. However, if it is strong, the territory's former rankings in the survey could be restored.