Hong Kong’s US dollar peg faces fresh calls for review – but is change feasible?

Economists and financial analysts warn abandoning the anchor would pose risks that far outweigh potential rewards

The Hong Kong dollar’s four-decade-old peg to the US dollar is facing fresh calls for review, after a local financial industry body urged greater use of the yuan and floated the idea of shifting to a basket of major currencies and gold – though financial analysts argue the current system is likely to remain in place.

The proposal to revisit the pegged exchange rate system was submitted this week by the Hong Kong Securities and Futures Professionals Association (HKSFPA), as the government gathers public feedback for its first-ever five-year plan.

“The peg to the US dollar cedes control over local monetary policy to the US Federal Reserve,” the association noted, citing financial pressure on local homebuyers and small businesses during recent rate-hike cycles.

“If Hong Kong clings to the old regime, any major dollar volatility or credit crisis would leave the Hong Kong dollar with no buffer, severely impacting financial markets, property prices and citizens’ retirement savings.”