Hong Kong Dollar Under Pressure but Will Stay Pegged to U.S. Dollar

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One of the things you don't have to think about in visiting Hong Kong is that the value of the currency will go up or down versus the U.S. dollar.  That is because it has been linked in value to the U.S. dollar since 1983. That was why my eye was caught by this headline in the Wall Street Journal: "China’s Stock-Market Rout Spreads to Hong Kong Dollar."  

According to the article by Chen Hong and Chao Deng write:

The fallout has now spread to the Hong Kong dollar, whose drop Friday means it has posted its biggest two-day loss since 1986. The city, a key center linking China to global financial markets, has kept its currency pegged to the U.S. dollar since 1983, moving within a trading band of 7.75 Hong Kong dollars to HK$7.85 to its U.S. counterpart each day.

Hong Kong's central bank has stated in response to the drop in the currency's value that it will not unpeg the Hong Kong dollar from the U.S. dollar. Based upon what I am reading, Hong Kong will do everything it can to avoid unlinking its currency and will call on Chinese financial reserves if necessary.

Still, it shows you how the plunge in oil and concerns about the Chinese economy can destabilize even a solid currency like the Hong Kong dollar.

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