HKMA says no plan to change exchange rate system

Asian Economic News, Sept 29, 2003

HONG KONG, Sept. 23 Kyodo

Hong Kong's de facto central bank said Tuesday the government has no intention or plan to change the 20-year-old fixed exchange rate system.

The Hong Kong Monetary Authority (HKMA) also said it bought US$60 million Tuesday morning to help stabilize the Hong Kong dollar.

The response of the HKMA came after the territory's currency strengthened overnight against the U.S. dollar.

''The strengthening of Hong Kong dollar last night took place outside Hong Kong market hours in a generally thin market against a somewhat volatile global currency market,'' an HKMA spokesman said.

''The spike in the T.T. rate (telegraphic transfer rate) was also fueled by speculation of unfounded rumors about a change in the Hong Kong dollar linked exchange rate system,'' the spokesman said.

Following the morning intervention, the Hong Kong dollar has stabilized.

''Under the currency board arrangement, the level of aggregate balance is determined by the inflow and outflow of funds into the Hong Kong dollar. This is a largely automatic system in which the HKMA plays a passive role,'' the spokesman said.

The aggregate balance is forecast to rise to HK$991 million Thursday, up from HK$525 million Wednesday.

The HKMA noted Tuesday the government is ''fully committed'' to maintaining the fixed exchange rate system, under which the Hong Kong dollar is pegged to the U.S. dollar at the rate of HK$7.8 to US$1.

The fixed rate ''is the linchpin of Hong Kong's monetary and financial stability, and an important factor in Hong Kong's economic success,'' the HKMA spokesman said.