Hong Kong Linked Exchange System Triggered

Hong Kong Monetary Authority’s strong-side Convertibility Undertaking (CU) of HK$7.75 to US$1, was triggered during the Hong Kong trading hours on the 21 April 2020. The CU was last triggered in October 2015.

The CEO of HMA said “The Hong Kong dollar exchange rate has been on a strengthening bias recently, mainly driven by increases in market carry-trade activities and equity-related demand for Hong Kong dollars. In addition to the current strong market demand for Hong Kong dollars, increases in fiscal spending will also raise demand for Hong Kong dollars. Upon triggering of the strong-side CU, the HKMA bought US dollars from and sold Hong Kong dollars to the market. This was conducted in accordance with the design of the LERS, which has been operating effectively.”

The LERS ensures that the Hong Kong dollar exchange rate remains stable within a band of HK$7.75-7.85 to one US dollar.

The LERS was implemented, on the 17 October 1983 as the cornerstone of the Hong Kong Monetary and financial stability. It has been weathered many economic cycles and has proved highly resilient in the face of regional and global financial crises over the years.

Further Reading

Hong Kong Monetary Authority – Linked Exchange Rate System

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