Hong Kong announced Monday a ceiling on its currency indicating signs of dwindling speculative investment in the region.
The Hong Kong dollar has been pegged at HK$7.8 to the US dollar since 1983. The currency will not be allowed to strengthen beyond HK$7.75, the city’s officials say. They also added that the HK dollar will not be allowed to weaken below HK$7.85 indicating the burden for the currency.
Some investors say the HK dollar is a proxy for the Chinese currency and will rise after China unpegs the renminbi. Joseph Yam, the Hong Kong Monetary Authority chief executive, said that the Hong Kong dollar is not an appropriate «tool for betting» on yuan appreciation.
"Hong Kong is simply tidying up its currency regime to deal with a scenario - strong speculation about an appreciation - that had not previously been a problem," said Julian Jessop, chief international economist at Capital Economics in London, stessing the importance of the move.
The HK dollar fell Wednesday to 7.809 to the US dollar, before rallying to 7.795.