Hong Kong Dollar - HKD

The Hong Kong dollar (HKD according to the ISO standards) has been since the end of the XIXth century the official currency of what was the autonomous port of Hong Kong (today and since 1997 ‘special administrative region” under Chinese sovereignty but has kept its “autonomy” after having been for more than a century under the British sovereignty).

First convertible into silver (like other currencies were into gold), the Hong Kong dollar was used in the area with other foreign currencies (Spanish, British, Chinese) and became the single local currency, indexed on the Pound Sterling, only in 1935.

After the interlude (if we can say so) of the Japanese occupation in the 40s, the Hong Kong dollar was again indexed on the British Pound (on the basis 1 GBP = 16 HKD), then to the American dollar from 1972 to 1974, after floating on the exchange market until 1983, before being strictly indexed again on the American dollar under the control of a “Currency Board” that fixed the indexation to 1 USD = 7.80 HKD.

As part of this control system, all the banks doing transactions in Hong Kong dollars have to have the equivalent of the deposit in American dollars. The Central Bank “de facto” of Hong Kong ( The “Hong Kong Monetary Authority”) provides the creation of a very important reserve in USD (“Hong Kong’s Exchange Fund”).

In this framework, it was decided that the interest rates of Hong Kong would always be aligned to the American key interest rates.

In order to adjust permanently these interest rates, a fluctuation band more flexible in relation to the dollar (1 USD = 7.75 to 7.85 HKD) was established by the Hong Kong monetary authorities from 2005; the other aim of the fluctuation “freedom” is to absorb the speculative movements which are on the HKD each time the yuan renminbi( the Chinese currency) is re-valued.