Hong kong monetary system
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Hong Kong Monetary System. HK’s Linked Exchange Rate System BY KWAN Kui Kwan. History. 1863 - 1935 Silver Dollar (silver standard base – I nt ’ l C urrency ) 1935 – 1967 HK$16.00 to UK£1.00 (1935 Silver Crisis) 1967 – 1972 HK$14.55 to UK£1.00 1972 – 1973 HK$5.65 to US$1.00

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Hong Kong Monetary System

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Hong kong monetary system

Hong Kong Monetary System

HK’s Linked Exchange Rate System

BY KWAN Kui Kwan


History

History

  • 1863 - 1935 Silver Dollar

    • (silver standard base – Int’l Currency)

  • 1935 – 1967 HK$16.00 to UK£1.00

    • (1935 Silver Crisis)

  • 1967 – 1972 HK$14.55 to UK£1.00

  • 1972 – 1973 HK$5.65 to US$1.00

    • (1972 UK Gvn’t float UK£)

  • 1973 - 1974 5.085 to US$1.00

  • 1974 – 1983 free floating


Crisis

Crisis

  • high volatility after free floating

  • Inflation from 2.7% (1975) to 15.5% (1980)

  • HK$5.13 to US$1.00 (1981) to HK$9.60 (1983)

  • September 1983 drop of 13% in 2 days

  • the future of Hong Kong (Return to PRC)

  • 15 October 1983 HK$7.80 to US$1.00


Crisis1

Crisis


How it works

How it works?

  • Certificates of Indebtedness

    • back the banknotes issued by the banks

  • Government-issued notes and coins

    • banknotes issued by HKMA

  • Aggregate Balance

    • balances of the accounts of banks in HKMA

  • Exchange Fund Bills and Notes

    • issued by the HKMA


Certificates of indebtedness

Certificates of Indebtedness

  • banks issue banknotes

  • required by law to purchase CoI

  • HK$7.80 to US$1.00

  • backing for the banknotes

  • HKD banknotes fully backed by USD

  • USD held by the Exchange Fund


Notes issued by banks

Notes issued by Banks

  • The Hongkong & Shanghai Bank Corporation


Notes issued by banks1

Notes issued by Banks

  • Bank of China


Notes issued by banks2

Notes issued by Banks

  • Standard & Chartered Bank


Government issued hkd

Government-issued HKD

  • Government appointed agent bank

  • agent bank responsible to store & distribute

  • settled against US dollars

  • HK$7.80 to US$1.00


Notes issued by government

Notes issued by Government


Money printer in hk

Money Printer in HK

  • Hong Kong Note Printing Limited

  • Located in Tai Po Industrial Estate

  • Share Distribution

    • HKMA - 55%

    • China Banknote Printing & Minting Corp. – 15%

    • HK & Shanghai Banking Corporation – 10%

    • Standard Chartered Bank (HK) Ltd. – 10%

    • Bank of China (Hong Kong) Limited – 10%


Money printer in hk1

Money Printer in HK


Money printer in hk2

Money Printer in HK


Aggregate balance

Aggregate Balance

  • Aggregate Balance may varies

  • HKMA responds to the flow of HKD


Exchange fund

Exchange Fund

  • actively managed to achieve a higher return

  • long term investment

  • existing foreign currency reserves

    • 9th while the 1st is China, 2nd Japan, 3rd Russia

  • total assets of HK$1,997.80 billion

    • The Monetary Base HK$1,032.00 billion


Exchange fund1

Exchange Fund

  • actively managed to achieve a higher return

  • long term investment

  • existing foreign currency reserves

    • 9th while the 1st is China, 2nd Japan, 3rd Russia

  • total assets of HK$1,997.80 billion

    • The Monetary Base HK$1,032.00 billion


Mechanism

Mechanism

  • CAPITAL INFLOW

  • Market Participants buy HKD

  • Upward pressure on the HKD exchange rate

  • HKMA Currency Board sells HKD

  • Monetary Base of HK expands

  • Interest rates fall

  • HKD exchange rate stability achieved


Mechanism1

Mechanism

  • CAPITAL OUTFLOW

  • Market Participants sell HKD

  • Downward pressure on the HKD exchange rate

  • HKMA Currency Board purchases HKD

  • Monetary Base of HK contracts

  • Interest rates rise

  • HKD exchange rate stability achieved


Hk monetary authority

HK Monetary Authority


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