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Hong Kong’s currency peg with the U.S. dollar has many problems. It is still the city’s least worst option.
The Hong Kong dollar USDHKD, +0.0089% on Thursday briefly touched the bottom of its permitted trading band against the U.S. dollar for the first time since the peg took its current form in 2005. That stoked concerns that the city’s de facto central bank would step in to drain some of the money sloshing around in the banking system—money that has fueled gains in the city’s stock and property markets.
The Hong Kong Monetary Authority stands ready to step in when the Hong Kong dollar falls to 7.85 to the U.S. dollar—as it did Thursday—or rises to 7.75.
It isn’t the first time Hong Kong’s 35-year-old dollar peg has come under strain.
An expanded version of this story can be found at WSJ.com.
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