The design and colour vary depending of the denomination. Today there are notes of 10, 20, 50, , and 1, Hong Kong dollars. The Hong Kong Dollar. Origins and history of the Hong Kong dollar. Did you know? Hong Kong Dollar is one of the most exchanged currencies in the world.
Hong Kong dollar has a fixed exchange rate to American dollar of 7. Hong Kong dollar is also used in Macau, the former Portuguese colony where the Macau pataca has a similar value. Online money orders: best price guarantee Order online and collect your currency at the branch of your choice. Why changing currency with us is better than with your bank? Global Exchange Your high-street bank Variety of currencies We have more than 25 currencies.
Investors will only be willing to borrow or lend at HKD interest rates outside that range if they believe that the peg may collapse during the period defined by the maturity of the interest rate considered. Between and , the HKD interest rate was below the range, indicating that investors believed the HKD might strengthen above 7. The cause of this was the appreciation of the renminbi against the USD from the summer of onward, which fuelled speculation that the HKD peg might be switched to the renminbi and lead to an appreciation of the HKD against the USD.
This illustrates the two-sided risk to the HKD peg. Between and , the month HIBOR rate was generally just inside the range, implying that investors believed the peg would remain unchanged. But in February , the HIBOR rate rose briefly above the upper limit of the interest rate range, implying that some investors grew concerned that the peg might collapse.
However, it recovered quickly and is now well inside the range. The following Figure shows the same calculation, but using year yields. The interest rate range is much narrower in this case, for the reasons explained above. Interestingly, the year HKD yields are in this case always below the range, except in March when they are just inside the range. This suggests that market participants attached little weight to the risk of the currency board being broken.
There are two main conclusions of the analysis. First, with the currency board having remained unchanged for 38 years, it is clear that the likelihood of a collapse of the peg must on average have been very low, perhaps a fraction of a percent per annum.
Had the probability been materially higher, one would have expected to see one or several episodes in which the currency board was overrun. Second, the HK dollar peg appears highly credible to market participants.
If anything, a strengthening of the HKD above the 7. While such a switch seems unlikely in the near term, from an historical and political perspective it remains a possibility in the more distant future.
Download the full edition of our Infocus publication here. Develop and improve products. List of Partners vendors. HKD is the abbreviation for the Hong Kong dollar, the official currency of Hong Kong, which is one of the most traded currencies globally. Hong Kong is a leading global financial center and its economy is considered to be the freest in the world.
The Hong Kong dollar was first seen as a distinct currency in Before then, various foreign currencies had been used and continued to be used even after the HKD's inception. In , the HK dollar was pegged to the U. Since then, it has remained pegged to the dollar, with the HKMA adjusting its value from time to time.
If, and when, the HKD hits either the upper or lower bound, the HKMA, which acts as the de facto central bank, intervenes to stabilize the currency. This trading band versus the USD has been in place since , although the upper and lower limits have been adjusted periodically. One notable attempt was made by legendary hedge fund manager George Soros in The HKD is the ninth most traded currency, and because it is pegged to the U.
Established in , the Hong Kong Monetary Authority is the central bank of the island and acts to control inflation and maintain the stability of the Hong Kong dollar HKD and of the banking sector through its monetary policy.
One of the key roles of the HKMA is maintaining currency stability. 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.
Banknotes are then run through a government exchange fund that holds U. Under capital control laws, a bank can only use HK dollars if it has the equivalent value of U. Hong Kong Monetary Authority. Accessed June 11, Yahoo Finance. Monetary Policy.
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