The city still has ample foreign reserves that can be used to prop up the currency, according to officials. Some analysts are urging the city to cut loose from the US dollar completely. Compare our rate and fee with our competitors and see the difference for yourself. During the 19th century, Hong Kong used a variety of foreign currencies such as Indian Rupees, Spanish Dollars, Mexican Pesos, and Chinese coins for daily transactions. As a British colony, an attempt to standardize the currency system was made in 1825 by introducing Sterling coins. This currency, however, proved to be unpopular and foreign coins continued to circulate.
HKD — Hong Kong Dollar
This was the point of departure as between the Hong Kong unit and the Straits unit. Three Chinese note-issuing banks—Hong Kong and Shanghai Banking Corporation Limited, the Bank of China (Hong Kong) Limited, and the Standard Chartered Bank (Hong Kong) Limited—are also authorized to issue Hong Kong dollars, subject to conditions laid out by the Hong Kong government. Banknotes are then run through a government exchange fund that holds U.S. dollars in reserves and records all transactions in the general accounts of the two currencies. Under capital control laws, a bank can only use HK dollars if it has the equivalent value of U.S. dollars on deposit.
Why Hong Kong can’t afford to keep its currency pegged to the US dollar
One of the key roles of the HKMA is maintaining currency stability. The linked exchange rate system is designed to stabilize the exchange rate between the Hong Kong dollar (HKD) and the United States dollar (USD). The fixed exchange rate system seeks to maintain parity with the USD within a tight range, allowing HKD note-issuing banks to issue new banknotes only when they deposit an equivalent value of U.S. dollars with the authority. The linked exchange system automatically self-corrects to maintain the stability of the Hong Kong dollar exchange rate. In 1863, London’s Royal Mint began issuing Hong Kong Dollar coins. By 1935, Hong Kong was the only country left on the silver standard.
The HKD is used in both Hong Kong and the neighboring territory of Macau, whose currency, the pataca, is pegged to the Hong Kong dollar. Commemorative banknotes have also been issued celebrating the note-issuing banks’ anniversaries as well as the Olympic Games held in Beijing in 2008 and 2022. In 1863, 1-mil (1⁄10-cent), 1-cent and 10-cent coins were introduced, followed in 1866 by 5-cent and 20-cents, half-dollar and 1-dollar.
- These banks, HSBC, Bank of China, and Standard Chartered, issue their own designs of banknotes in denominations of HK$20, HK$50, HK$100, HK$150, HK$500, and HK$1000, with all designs being similar to one another in the same denomination of banknote.
- Production of the 1-mil ended in 1866, whilst that of the half-dollar and 1-dollar ceased in 1868, with only the half-dollar (now with the denomination given as 50 cents) resuming production in 1890.
- One of the primary benefits of Hong Kong’s position to Beijing is the fact that the territory permits capital to flow to and from mainland China, in a legal and institutional system more appealing and understandable to foreign investors and financial institutions.
- Ackman tweeted in November that “it is only a matter of time” before the peg breaks.
- In 1863, 1-mil (1⁄10-cent), 1-cent and 10-cent coins were introduced, followed in 1866 by 5-cent and 20-cents, half-dollar and 1-dollar.
All Hong Kong dollar Exchange Rates
These notes were printed in paper in 2002 and in polymer since 2007. All older HK$10 banknotes, although rare and being phased out, remain legal tender. In 1975, the HK$5 notes were replaced by coins, whilst HK$1,000 notes were introduced in 1977. The Mercantile Bank was absorbed by the HSBC in 1978 and ceased issuing notes.
Hong Kong’s currency is facing its biggest test since the global financial crisis of 2008. Our currency rankings show that the most popular Hong Kong Dollar exchange rate is the HKD to USD rate. stock forecast based on a predictive algorithm The currency code for Dollars is HKD, and the currency symbol is $. Below, you’ll find Hong Kong Dollar rates and a currency converter. It has successfully withstood a series of daunting crises, including the stock market crash in 1987, the Asian financial crisis in 1998, the severe acute respiratory syndrome (Sars) outbreak in 2003, as well as the global financial crisis in 2008. The HKD is the ninth most traded currency, and because it is pegged to the U.S. dollar, with upper and lower limits, it does not exhibit any strong unique correlations with other currencies.
About 40 years ago, global investors panicked during negotiations between Britain and China over the city’s future, triggering a sharp depreciation in the value of the Hong Kong dollar. The most likely alternative to maintaining the link to the US dollar would be to peg the currency to China’s yuan, Wright wrote. The former British colony still pegs the value of its money to that of the US dollar. It’s an arrangement that dates back almost four decades and has long been considered a guarantee of financial stability and prosperity. The Hong Kong dollar was originally set at a rate of 7.8 per US dollar, although it has been allowed to trade between 7.75 and 7.85 per US dollar since 2005.
Whether you need to make cross-border payments or FX risk new zealand dollar to canadian dollar exchange rate convert nzd management solutions, we’ve got you covered. Schedule international transfers and manage foreign exchange risk across 130 currencies in 190+ countries. The design of the peg means the HKMA raises or cuts the city’s benchmark interest rates in lockstep with rate changes by the US Federal Reserve, thereby giving up its independence to adjust monetary policy in response to changing economic conditions. The Hong Kong dollar is backed by a war chest of around HK$4 trillion (US$571 billion) held in the HKMA’s Exchange Fund, one of the world’s largest foreign exchange reserves, that can be used to defend the currency. On September 24, 1983, after months of investor and consumer unease over the depreciation of the Hong Kong dollar and negotiations about the city’s return to mainland rule, panic selling of the local currency drove it to an all-time low of 9.6 HKD per USD. As of today, coins in denominations of HK$10, HK$5, HK$2, HK$1, 50 cents, 20 cents and 10 cents are issued by the Hong Kong Monetary Authority on behalf of the Government of Hong Kong.
The Hong Kong Monetary Authority (HKMA) is committed to keeping the Hong Kong dollar between 7.75 and 7.85 per greenback. When the currency reaches either end of the band, the authority will intervene and defend the peg, through buying or selling Hong Kong dollars on the currency market. Logan Wright, partner and head of China market research at the Rhodium Group, pointed out in March that risks to the Hong Kong dollar peg come mainly from market uncertainty about Beijing’s intentions for the currency. Worries that money might be leaking out of China — despite strict capital controls — via Hong Kong could prompt Beijing to act if the flight of cash intensifies, he added. The steep fall is a sign that investors are ditching the Hong Kong dollar.
On New Year’s Day (1 January) 1993 at stroke of midnight HKT, HSBC, Bank of China and Standard Chartered officially introduced all new banknote designs. Authorities may have no interest in changing Hong Kong’s currency system just yet, but “most importantly, financial markets will start looking to Beijing to assess those preferences, rather than the words of the HKMA or other Hong Kong authorities,” he added. The institutional structure that underpins confidence in Hong Kong’s dollar peg may also have started cracking. “It is that huge surge in debt, falling asset prices, and ever cloudier outlook for Hong Kong’s economy which makes defending the peg so much more problematic than during the Asian crisis of the late 1990s,” he said.
The alphabetic online retail forex broker list economic and social costs of maintaining Hong Kong’s dollar peg have become untenable, according to some investors. But rising interest rates are hobbling the Hong Kong economy at a time when it’s trying to recover from tough Covid-19 restrictions. But in the last 18 months, US interest rates have been the main driver for the pressure on Hong Kong’s currency. Some hedge funds, such as billionaire Bill Ackman’s Pershing Square Capital Management, have reportedly taken large positions against the Hong Kong dollar.