The 'refinements' to Hong Kong's exchange-rate system announced last week - setting the revered figure of $7.80 as the mid-point rather than the boundary of the range, and introducing symmetry between the strong and weak sides with an intervention range of $7.75-$7.85 to the US dollar - were so neat and logical that one might ask why they were not enacted ages ago. One answer would be that moving the weak-side limit from $7.80 to $7.85 was something which could only be done when the exchange rate was, as recently, particularly firm, since otherwise it might have been interpreted as a surreptitious devaluation. Another answer would be that the system had, for a long time, been working perfectly well, so 'if it ain't broke, don't fix it'. Over the past year or two, however, things had not been quite so comfortable. Some exchange-market professionals seemed increasingly to regard the absence of a clear limit on the strong side as a sign that the Hong Kong Monetary Authority might be happy to accept some appreciation of the currency, and might even be preparing formally to revalue, in the event of the mainland authorities revaluing the yuan. There was no material justification for such beliefs - the monetary authority was resolutely intervening to cap any appreciation and, in doing so, was operating a de facto band which was no wider than the one which it has now formally prescribed. However, the authority became impatient over the continuing revaluation sentiment, and uncomfortable with the resulting downward pressure on local interest rates, at a time when a higher level was possibly more appropriate to the general condition of the economy. By announcing an imminent shift of the weak-side rate to $7.85, officials cleverly guaranteed the initial success of their package, as evidenced by the sudden reversal of inflows and a firming of interest rates. This was in large part because speculators - who had used US dollars to buy Hong Kong dollars on the assumption that, if they wanted to unwind the position, it would never cost them more than $7.80 to buy back each US dollar - were suddenly told that they might in future have to pay as much as $7.85. For many, this may have tipped the scales of their calculations, so they exited during the first couple of days following the announcement, while the limit rate was still $7.80. Despite officials' initial satisfaction with the effectiveness of the measures, it will be a while before they can be confirmed as a lasting success. That will be judged according to whether these essentially technical adjustments dispel permanently any expectations of a more substantive adjustment to the Hong Kong dollar if or when the mainland adjusts the yuan. There are those who may still believe that in economic terms it would be best for Hong Kong to match any move by the yuan; and there are others who, despite the clarity of the Basic Law in conferring monetary autonomy on Hong Kong, may feel that it would be appropriately patriotic to align our currency to that of the mainland. Any prevalence of either of these views could quickly lead to a resumption of inflows to the Hong Kong dollar, with a replay of the consequent abundant liquidity and plunging interest rates. In that scenario, last week's measures would actually help speculators, by assuring them that Hong Kong dollars are available at no worse a price than $7.75 to the US dollar. Of course, both the financial secretary and the monetary authority chief have stressed that, as ever, $7.80 is here to stay. But if there are people out there who really do think that Hong Kong would be better off with its currency hitched to the yuan, I would once again urge our officials to go one step further than merely asserting the permanence of $7.80, and share with us their analysis as to why it is indeed superior to the option of tracking the yuan. Tony Latter is a visiting professor at the University of Hong Kong.