June 12 Former Hong Kong Monetary Authority
chief Joseph Yam has outlined possible measures to strengthen
the city's monetary system, suggesting a fixed exchange rate
cannot be an end in itself.
The recommendations immediately sparked fresh speculation
about how much longer the global financial centre will stick to
its currency peg to the U.S. dollar, which was adopted in 1983.
Yam, who retired as head of Hong Kong's de facto central
bank three years ago, was speaking in his private capacity as a
professor at the Chinese University of Hong Kong.
He outlined three possible refinements:
- widening meaningfully or simply removing the Hong Kong
dollar's convertibility zone or turning it into a corridor for
the exchange rate against the U.S. dollar or China's remnimbi,
or an undislcosed basket of currencies
- Possibly doing away with the exchange rate target or zone
and focusing on managing domestic monetary conditions
- Possibly was unifying "two different Convertibility
Undertakings for the two elements of the monetary base, namely
the bank notes in circulation and the Aggregate Balance".
Yam is an executive vice president at the China Society for
Finance and Banking at the People's Bank of China.
The last major change to the currency regime was in 2005,
when the trading band for the Hong Kong dollar was widened to
7.75/7.85 per U.S. dollar.
(Reporting By Anne Marie Roantree)