Hong Kong’s dollar returns to form as world’s most ‘boring’ currency as it marks 36th peg anniversary with little fuss

For an hour on Wednesday, as Hong Kong’s leader struggled to deliver the most important policy address of the year amid heckling by opposition lawmakers in the city’s legislature, the Hong Kong dollar swung between a 0.03 per cent gain and a 0.01 per cent loss.

But for the mild movement, Hong Kong’s currency is marking the 36th anniversary of its peg to the US dollar with little fanfare. It was on October 17, 1983, the then financial secretary John Bremridge announced that the Hong Kong dollar would be pegged at a rate of HK$7.80 to US$1, which was introduced after a sharp fall in the currency’s exchange rate to HK$9.50 earlier that month from about HK$6.

The plunge was triggered by a crisis of confidence among investors as the British and Chinese governments began to discuss the 1997 handover of Hong Kong. Thirty-six years on, the peg has provided a stable exchange rate environment for the city to develop into an international financial centre, although it also means the city has to follow the US interest rate moves and cannot use monetary policy to control inflation or property prices.

The peg has allowed Hong Kong to have a stable exchange rate, which has held steady in the face of daunting crises, including the stock market crash in 1987, Asian financial crisis in 1998, the Severe acute respiratory syndrome (Sars) outbreak in 2003 and the global financial crisis in 2008.

More recently, the peg has not once in the past four months weakened to the lower end of its trading band against the US dollar even as the city’s economy has been buffeted by its worst political crisis ever.