(Reuters) -Hong Kong will maintain its currency peg to the U.S. dollar, the financial hub’s leader said in an interview published on Monday, despite escalating geopolitical tensions and some calls to shift to a Chinese yuan peg.
The Hong Kong dollar has experienced sharp volatility over the past two months, strengthening to hit the strong end of the trading band and prompting the city’s de-facto central bank to forcefully step up intervention, before the currency softened to near the weaker limit in recent sessions.
“Hong Kong’s link with the U.S. dollar has proven to be one of the fundamental success factors,” John Lee told the South China Morning Post, noting the peg had always come under pressure, especially in uncertain times.
In order to defend the currency’s peg to move within 7.75 and 7.85 per U.S. dollar range, the Hong Kong Monetary Authority injected HK$129.4 billion into the market to purchase $16.7 billion worth of U.S. dollars in multiple interventions last month.
Some market watchers have called for switching Hong Kong’s U.S. dollar peg to the yuan at a time when trade tensions between the world’s two largest economies have created uncertainty.
Lee said his administration would strengthen the city’s role as the global offshore yuan hub, while continuing to defend the U.S. dollar peg.
“We will do more (offshore yuan) product diversification, so that it will generate more trade,” he told the newspaper, noting that about 80% of the offshore yuan payments were processed in Hong Kong.
(Reporting by Shanghai Newsroom; Editing by Lincoln Feast.)
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