LettersHong Kong’s dollar peg is worrying as the US continues to print money

Name: What is the Hong Kong Dollar Peg?
Uploaded: 2021-02-23T22:25:10.000Z
Duration: 1 min 43 s
Description: What is the Hong Kong Dollar Peg?

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A woman leaves a currency exchange booth in Tsim Sha Tsui in June 2020. Hong Kong’s dollar peg has allowed the government to be too passive, even when assets are bubbling in plain sight. Photo: Sam Tsang

Letters

Published: 6:25am, 24 Feb 2021Updated: 6:25am, 24 Feb 2021

The Covid-19 pandemic has hit many economies hard. Amid industrial shutdowns, many countries have been forced to increase their imports while seeing their exports slide. Some, such as the United States, are resorting to quantitative easing to increase their money supply, which in turn weakens their currency and makes their exports cheaper and more competitive.

But the US is unique in that the dollar is the international reserve and payment currency, and the American consumer market is the world’s largest. As the dollar depreciates under the quantitative easing regime, the US is shifting its domestic economic pressure to other countries. The result for the rest of the world is imported inflation and shrinking foreign exchange reserves.

Hong Kong, with its dollar-linked exchange system, is particularly threatened. Yet our officials seem less than attuned to the problem. Hong Kong’s dollar peg has allowed the government to be too passive in responding to crises, even when assets are bubbling in plain sight. It cannot actively or easily adjust the currency exchange rate or interest rates to respond to fluctuations in the business cycle.

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What is the Hong Kong Dollar Peg?

In these unusual economic times, I hope Hong Kong officials are paying closer attention to the effects of quantitative easing and the dollar – and running through the worst-case scenarios of bubbles bursting and the global financial instability that would follow.

Angela Lui, Fanling

Hongkongers deserve another cash handout

I agree that Hong Kong should pay out another HK$10,000 (US$1,290) to all of its residents (“Labour group wants cash handout and unemployment fund in next budget”, February 15).