The Hong Kong Monetary Authority (HKMA) has reiterated its commitment to maintaining the US dollar peg, despite increased volatility in global currency markets. Senior officials emphasized that the Linked Exchange Rate System (LERS) remains the most appropriate arrangement for Hong Kong’s unique economic circumstances.

The HKMA highlighted its strong financial reserves, which it stated are more than sufficient to defend the peg against speculative attacks. These reserves, accumulated over years of prudent fiscal management, provide a robust buffer against external shocks.

“We have both the will and the resources to maintain the stability of the Hong Kong dollar,” a spokesperson for the HKMA stated. “The LERS has served Hong Kong well for over three decades, and we are confident in its continued effectiveness.”

The reaffirmation comes amid concerns about potential capital outflows from emerging markets, including Hong Kong, as the US Federal Reserve continues to taper its asset purchase program. Some analysts have speculated that the Hong Kong dollar peg could come under pressure if interest rate differentials between Hong Kong and the US widen significantly.

However, the HKMA remains steadfast in its commitment, emphasizing that it will actively manage liquidity in the market to ensure the smooth functioning of the LERS. The authority also noted that Hong Kong’s strong economic fundamentals, including its robust financial system and healthy current account surplus, provide additional support for the peg.

Key factors supporting the peg include:

• Substantial foreign exchange reserves
• A credible monetary policy framework
• A strong and resilient banking sector

The HKMA will continue to monitor market developments closely and stands ready to take appropriate action to maintain the stability of the Hong Kong dollar.