Hong Kong Dollar Peg to Chinese Yuan: A Pragmatic Shift or Risky Gamble?

Hong Kong Dollar Peg to Chinese Yuan: A Pragmatic Shift or Risky Gamble?

Since 1983, the Hong Kong dollar (HKD) has been anchored to the US dollar (USD) via the Linked Exchange Rate System (LERS). This is a robust currency board arrangement underpinned by full reserve backing — US dollar reserves fully back the amount of Hong Kong dollars issued. Operated under a strict, transparent and resilient Currency Board framework, the system maintains the stability of the Hong Kong dollar within a narrow band of $7.75 to $7.8…