Currency peg vital for Hong Kong’s status as global finance centre even as US dollar declines, says former monetary authority chief Joseph Yam

Yam, who helped set up the peg in 1983, still believes it is in the best interests of Hong Kong because it gives confidence to international investors

US unlikely to ‘weaponise’ the peg or capital markets as it would hurt itself in the process, says Yam

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Joseph Yam Chi-kwong, former head of the HKMA, pictured in 2018. Photo: Edmond So

Published: 8:15pm, 29 Jul 2020Updated: 10:06am, 30 Jul 2020

Hong Kong should hang on to its 37-year-old currency peg to the US dollar because a link to the world’s most used currency is the best option to maintain its role as an international financial centre, said the city’s longest-serving monetary authority chief.

Joseph Yam Chi-kwong, who helped set up the peg in 1983, still believes fixing the Hong Kong dollar to the greenback at 7.8 is in the best interests of Hong Kong because it gives confidence to international investors to come here to do business.

It marked the second time in a week that Yam – now an executive council member – has spoken out to shore up confidence in the peg and in Hong Kong as a reputable global finance hub. He gave a video interview on Monday, released by the Hong Kong Monetary Authority he headed between 1993 and 2009, on the same subject.

Over the years, critics have periodically called for the Hong Kong dollar to be decoupled from US monetary policy. Those calls have escalated recently amid a spike in US-China political tensions and fears that Washington may introduce measures of its own that would break the peg.

On Wednesday, Yam gave an hour-long speech and media interview via a Zoom conference arranged by the Our Hong Kong Foundation, a think tank established in 2014 by former Chief Executive Tung Chee-hwa.

“Tying the local dollar with the most important currency in the world is the most appropriate monetary policy for Hong Kong,” he said, rejecting the idea that the peg should be modified to link with a basket of currencies or the yuan.

Yam’s supportive voice comes after the recent decline of the US dollar and a sharp rise in the gold price led the US investment bank Goldman Sachs to warn on Tuesday that the US dollar’s reign as the world’s reserve currency is coming under threat.