Hong Kong dollar no longer used as proxy for yuan/US dollar trade

Hong Kong dollar no longer used as proxy for yuan/US dollar trade - HKMA

	Published : Tue, 30 Jan 2007 11:27 By : Agencies Print this Story

HONG KONG (XFN-ASIA) - The Hong Kong Monetary Authority (HKMA) said the local currency is no longer being used by traders as a proxy for trading the yuan against the US dollar as the yuan's value has surpassed the strength of the Hong Kong dollar's official peg at 7.8 against the US currency.

'Recent evidence suggested that the Hong Kong dollar is no longer used as a proxy for trading the renminbi (yuan),' HKMA said.

The yuan actually began moving up into the Hong Kong dollar trading range of 7.8500 to the US dollar in late November, but it was only on January 11 that it hit the mid-point of the currency's trading range against the dollar when the People's Bank of China fixed the yuan at 7.7977 to the US dollar at the morning fixing.

HKMA said that as China's economy grows rapidly with continued market liberalization and

increasing economic openness, the yuan 'could evolve into a major international currency or even a reserve currency.'

However, HKMA said in a paper posted on the website of the Legislative Council (LegCo) today that while the Hong Kong dollar has weakened slightly past the 7.8 peg against the US dollar, the level remains well within the convertibility zone of 7.75 and 7.85.

'The HKMA has not conducted any market operations to affect the exchange rate of the Hong Kong dollar,' the authority said.

The impact of the yuan's strengthening against the US dollar on the Hong Kong dollar exchange rate was limited, it pointed out.

The authority also said that the continued appreciation of the yuan is unlikely to affect Hong Kong significantly ... although there may be some short-term psychological impact on consumers traveling to the mainland.'

HKMA officials are scheduled to give members of LegCo's financial affairs panel a presentation about its work on Monday (Feb 5).

(1 usd = 7.8 hkd)

jun.concepcion@xfn.com

jc/net

Hong Kong dollar no longer used as proxy for yuan/US dollar trade - HKMA