Bloomberg News

Hong Kong’s Central Bank Welcomes IMF’s Support for Currency Peg

October 24, 2011

Oct. 24 (Bloomberg) -- Hong Kong Monetary Authority said in an e-mailed statement it welcomed the International Monetary Fund’s support of the city’s currency peg to the U.S. dollar.

Hong Kong’s linked exchange-rate system will continue to be an “important foundation” for the city’s economic system, Anoop Singh, director of the IMF’s Asia Pacific department, wrote in an article published in the South China Morning Post.

The Hong Kong dollar has been kept at about HK$7.80 versus the U.S. currency since 1983 and has been allowed to trade as much as 5 Hong Kong cents either side of that level since 2005. Speculation that policy makers would be forced to abandon the peg increased as the city’s consumer prices excluding distortions from government subsidies rose 6.3 percent in August, the highest since the global financial crisis in 2008.

“Hong Kong faces unrelenting inflationary pressure,” Singh wrote in the article. “The property market is still digesting the frenetic pace of the past two years while the rally in office property prices continues unabated.”

Property prices and rents in Hong Kong are expected to remain “very high” in the next 12 to 18 months and will continue to affect consumer prices even after the government’s efforts to expand land supply, Singh said.

--Editors: Richard Frost, Hwee Ann Tan

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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