The linked exchange rate system is a fixed exchange rate system, that is, the exchange rate between the local currency and a specific foreign currency is fixed, and the currency circulation is linked to foreign exchange reserves in strict accordance with the established exchange rate. If the pegged currency is US dollars, it can also be called "dollarization". The linked exchange rate system depends on Hong Kong's huge foreign exchange reserves.

The linked exchange rate is determined according to its own foreign exchange reserves, so it is less affected by interest rates. Under the practice of exchange rate, it is not good for the central bank to adjust the domestic economy through monetary policy.

Under the floating exchange rate system, the influence of intermediary interest rate on the balance of payments can be reversed by exchange rate fluctuations, thus increasing the effectiveness of interest rate policy. For example, when China adopts a tight monetary policy, raising interest rates will lead to a capital account surplus and increase foreign exchange reserves, but at the same time, the appreciation of RMB can affect the current account and offset the capital account surplus.

Therefore, when the interest rate changes, the exchange rate will also change.