Editorial | Hong Kong dollar safe from speculators for now
- Panic buying of the US dollar has raised fears for the local currency among some, but with a huge war chest to defend it and an inflow of hot money it appears too early to worry
The sight of people queuing to unload Hong Kong dollars reflects uncertainty, amid talk of a threat to the currency’s peg to the US dollar. It stems from US President Donald Trump’s plan to withdraw Hong Kong’s special trade status over the proposed national security law.
Trump’s plan, though still vague in detail, has prompted fears among some economists that the city might lose its competitive edge, causing an exodus of funds.
They have been stoked by speculation, such as an interview with an American hedge fund chief who is betting against the Hong Kong dollar. Financial Secretary Paul Chan Mo-po and the Hong Kong Monetary Authority, the city’s de facto central bank, have led a robust argument for confidence in the local dollar, underpinned by a war chest in the Exchange Fund which stood at US$528 billion at the end of April.
Despite the appearance for a time of panic buying of the US dollar at money-changers and banks, there is no evidence of an abnormal capital outflow. Indeed, the inflow of hot money for the carry trade flies in the face of talk of capital flight.
The city stands ready to defend the currency’s link to the US dollar with help from the mainland through a 400 billion yuan (HK$437 billion) currency swap system.