Heard that Hong Kong was intervening by buying dollars, the charts don't show much drastic movement either way though. Will be interesting to watch as a precursor to yuan/dollar revaluation.
Intervention in general has failed miserably. Japan, Germany and Hong Kong have tried it this year (and will continue to do so). They have not been able stop the dollar's slide. Most experts think that this continued slide will not be a problem as long as it is orderly, and of course it has to revert at some point. Regards, Steve46
Sorry, the previous post was sent out before it was complete. I wanted to mention that this is what I understand from observation. I don't have specialized training in this field and am always willing to learn something new. Best Regards, STeve46
That's why any deviation is noteworthy. Pegs can be forcefully broken and can move rapidly as a result -- southeast asian currencies in 97, for example. But it's much easier to devalue your own currency than defend it from going down.
the hkd peg ain't going to break anytime soon.. the treasury has the world's 3rd largest USD deposit..( and they will print as much as money as possible to keep the peg..even if interest rates dips into negative.. they are happy to let the US ROB the hard-working HKers by devaluation and inflation.. the us print money to pay for their exports and I can't believe the asian government are happy to let them do that just to keep the export sector floating.. very stupid if you ask me..same as working for nothing..
Can anyone recommend a website or a book that describes the Mechanics of Pegging ? I know that Hong Kong pegs its currency to USD but how do they do it ? It can't be as simple as Buy the USD and sell the HKD. TIA
I believe the reason they are buying dollars is that there has large inflow of money into HK for purchase of shares in the stock market. In particular the H-share IPO's and H-shares themselves. They need to buy dollars to even things out and keep the rate in line. BTW, the last two times there was an attack on the HKD the monetary authority raised overnight rates to well over 100% and bought over 15% of the Hang Seng Index free float respectively. They've got some deep pockets and have shown that they'll go to extreme measures to intervene. The peg will only break when they want it to break.
As far as I know neither German Bundesbank nor European Centralbank did intervene in FX markets in 2003.
HK has a currency board, which unlike the one in Argentina, can only issue a HKD for every USD they get in. Three banks are allowed to issue notes, although I think they may have consolidated this in the last year. A book worth looking into is The Dollarization Debate. I haven't finished it yet, but after reading the first part, I think it will be a long time before HK or China float their currencies. The dollarization Debate