Hong Kong could relinquish its currency peg with the United States dollar and become aligned with the yuan over the long term as the economic relationship between the mainland and the SAR strengthens. According to Russell Jones, global head of foreign exchange research for Lehman Brothers, such a move may prove to be 'logical'. Mr Jones stressed this was not a criticism of the Hong Kong dollar's peg. The Hong Kong dollar is pegged to the US currency at US$7.78. Such a scenario bodes well for the SAR at a time when US interest rates are being slashed. Hong Kong rates generally follow US Federal Reserve policy. 'I think the peg has served Hong Kong extremely well,' Mr Jones said at a Lehman Brothers global economic conference yesterday. 'And we do not expect a change soon . . . but over the last two decades, the Hong Kong economy has become increasingly integrated with the Chinese economy and as they get closer and closer together, it would be more logical to manage its exchange rate along with the [yuan],' he said. Also at the conference yesterday, Lehman's Brothers Asia chief economist Paul Sheard told delegates China and Hong Kong are the 'bright spots' in Asia as the US economy slows. Mr Sheard said he was 'particularly optimistic' about Hong Kong, with the key driver being its relationship with the mainland after it becomes a member of the World Trade Organisation. 'This keeps the pressure on China to reform and of course opens up opportunities for foreign direct investment,' Mr Sheard said. 'When we say we are optimistic, the whole region is decelerating, but the positive story on Hong Kong is China and Hong Kong will benefit from that . . . it's not a rosy story, but relatively [positive] within Asia.' While Asia ex-Japan growth is facing a downturn as electronics downsizing globally impacts on exports, Lehman does not see it returning to 'a kind of crisis'.