The cost of living in Hong Kong has dropped significantly thanks to a low inflation rate and the pegging of the dollar to the weakening American currency. In the latest survey of more than 130 cities, Hong Kong fell five places to become the 12th most expensive city in the world. The Economist Intelligence Unit (EIU) conducts the global cost-of-living study twice a year to help companies determine expenses for their expatriate executives, using New York as the baseline of 100. Like last year, Tokyo - with a rating of 141 - is the world's most expensive city to live in, followed by Osaka and Kobe, both at 136. Oslo at 129 came in third on the list and Paris (127) fourth. London (121), thanks to the rising value of the pound against the American dollar, replaces Hong Kong as the seventh most expensive city in the world. Because of the weakening US currency, New York - while still the most expensive American city - fell to 23rd place. Singapore (102) ranked 19, along with Hong Kong (111), is the only other Asian city to make it in the top 20 if the three Japanese cities are discounted. Beijing (87) ranks 44, Shanghai (86) came in at 46, and Seoul (99) is No25 on the list, down from 19. Taipei (87), 37 last year, ties with Beijing this year at No44. The survey, which targets cities with a substantial foreign business presence, compares a basket of goods and services in US dollar terms from more than 130 cities. 'Traditionally expensive destinations such as Hong Kong have seen a fall in relative costs thanks to low inflation and the pegging of the currency to the US dollar,' an EIU spokesman said. 'Japanese cities are increasingly seeing European cities closing the gap thanks to a long period of low or negative consumer inflation coupled with [a stronger euro].' The latest Hong Kong consumer price index increased by 0.8 per cent compared with a year ago. Sixteen of the top 20 cities on the list are in western Europe.