The Hong Kong Financial Authority is Hong Kong’s central financial institution.
The HKD trades in a band linked to the US greenback prescribed by the HKMA.
You possibly can see the bounds of the band within the chart under.
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The Hong Kong Financial Authority (HKMA) typically adjusts its rates of interest in step with the U.S. Federal Reserve’s selections primarily due to the linked trade fee system between the Hong Kong Greenback (HKD) and the US Greenback (USD).
Established in 1983, this technique pegs the HKD to the USD inside a slender band, at present at a fee of about 7.8 HKD to 1 USD, with allowable fluctuations inside a good vary.
To maintain the foreign money peg secure, the HKMA should regulate its rates of interest to be in step with these of the USD. If the rates of interest in Hong Kong have been considerably increased than these within the U.S., it might entice a circulate of USD into Hong Kong, growing the demand for HKD and probably pushing the trade fee exterior its designated band. Conversely, if Hong Kong’s charges have been a lot decrease, it might encourage outflows of HKD in trade for USD, once more risking the soundness of the peg.
You will discover that the HKMA fee is barely above the Fed’s.
