The peg between Hong Kong dollar and US dollar is a linked exchange rate system, that is, the exchange rate between Hong Kong dollar and US dollar is fixed, and it is strictly implemented according to 1 US dollar to HK$ 7.8.
When HK$ 65,438+0 is converted into HK$ 7.75, the Hong Kong Monetary Authority buys US dollars; Conversely, when HK$ 65,438+0 is converted into HK$ 7.85, hi sells HK$, thus making the linked exchange rate run symmetrically around HK$ 7.8.
Secondly, the advantages of linking the Hong Kong dollar with the US dollar.
Hong Kong first implemented the linked exchange rate system from 1983. Prior to this, the exchange rate fell sharply due to lack of confidence in the Hong Kong dollar.
After the implementation of the linked exchange rate system, people's confidence in the Hong Kong dollar gradually recovered, which also kept the Hong Kong dollar stable during market fluctuations and reduced the impact of exchange rate fluctuations on Hong Kong's economy.
In addition, many consumer goods and foods in Hong Kong depend on imports, and the linked exchange rate system has a positive effect on stabilizing Hong Kong's stock price.
Second, the shortcomings of linking the Hong Kong dollar to the US dollar.
The linked exchange rate system makes Hong Kong have to keep pace with the interest rate in the United States, and cannot play the role of using monetary policy to regulate the economy. When the external environment changes greatly, it is easy to become the target of speculators. However, it is also very difficult to change the exchange rate system linking the Hong Kong dollar to the US dollar.