The Hong Kong Monitory Authority Strive To Keep The Currency Exchange Rate Fixed

Daily Forex Fundamentals | Written by ecPulse.com | Oct 02 09 07:26 GMT |

The monitory authority in Hong Kong has been working on stabilizing its currency exchange rate by pumping billions in the markets and banks in order to maintain a stable relationship between their currency and the dollar that witnessed considerable variations lately, aiming to bring stability to their financial system. Mr. Norman Chan, who became the president of the Monetary Authority in Hong Kong, said that the stability of the local currency is a priority for him, and this stability will be kept by maintaining fixed the exchange rate between the Hong Kong dollar and the U.S. dollar. In this sense, the authorities pumped 3.1 billion Hong Kong dollars, the equivalent of 400 million US dollars, in banks in order to keep the local currency from rising. On the other hand, the authority encourage the spread of Chinese yuan in the financial markets in Hong Kong that should be used in investments and trade. It is worth mentioning that the Chinese government began to sell yuan backed securities for the first time in Hong Kong, using the 56.7 billion yuan of reserve that exists in the city. The monetary authority is responsible for pushing banks and financial institutions to expand the use of the yuan, and expect the yuan to be used gradually in the financial transactions that take place daily. Fiscal policy makers have fixed the Hong Kong dollar at 7.8 Hong Kong dollars against the dollar in 1983, and in 2005 the new range has been set between 7.75 Hong Kong dollars to 7.85 against the dollar. Hong Kong was directly affected by the global financial crisis that led to a sharp fall in the US dollar and it continuing volatility, which made it difficult for the monetary authority to maintain a stable financial system since the local currency is pegged to the dollar so the Hong Kong Monetary Authority strive to always maintain the exchange rate fixed. Retail sales in Hong Kong fell during the month of August to -0.2%, reaching to 22.7 billion Hong Kong dollars, from the previous revised reading of -5.3%, as a result to the increase in the number of visitors to Hong Kong by .8% during the month of August. Retail sales are expected to remain weak in the upcoming period, because of the increase in the unemployment rate in Hong Kong that reached to 5.4%, the highest level in four years. Yet a rise in retail sales and the financial stability are able to put an end to the sharp recession that Hong Kong fell into. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk