London Daily

Focus on the big picture.
Saturday, Feb 21, 2026

Currency peg vital for Hong Kong’s status as global finance centre even as US dollar declines, says former monetary authority chief Joseph Yam

Yam, who helped set up the peg in 1983, still believes it is in the best interests of Hong Kong because it gives confidence to international investors. US unlikely to ‘weaponise’ the peg or capital markets as it would hurt itself in the process, says Yam

Hong Kong should hang on to its 37-year-old currency peg to the US dollar because a link to the world’s most used currency is the best option to maintain its role as an international financial centre, said the city’s longest-serving monetary authority chief.

Joseph Yam Chi-kwong, who helped set up the peg in 1983, still believes fixing the Hong Kong dollar to the greenback at 7.8 is in the best interests of Hong Kong because it gives confidence to international investors to come here to do business.

It marked the second time in a week that Yam – now an executive council member – has spoken out to shore up confidence in the peg and in Hong Kong as a reputable global finance hub. He gave a video interview on Monday, released by the Hong Kong Monetary Authority he headed between 1993 and 2009, on the same subject.



Over the years, critics have periodically called for the Hong Kong dollar to be decoupled from US monetary policy. Those calls have escalated recently amid a spike in US-China political tensions and fears that Washington may introduce measures of its own that would break the peg.

On Wednesday, Yam gave an hour-long speech and media interview via a Zoom conference arranged by the Our Hong Kong Foundation, a think tank established in 2014 by former Chief Executive Tung Chee-hwa.

“Tying the local dollar with the most important currency in the world is the most appropriate monetary policy for Hong Kong,” he said, rejecting the idea that the peg should be modified to link with a basket of currencies or the yuan.

Yam’s supportive voice comes after the recent decline of the US dollar and a sharp rise in the gold price led the US investment bank Goldman Sachs to warn on Tuesday that the US dollar’s reign as the world’s reserve currency is coming under threat.

The Hong Kong dollar strengthened to 7.7505 on Wednesday afternoon, putting it right at the strong end of the permitted trading band beyond which the HKMA steps in to intervene. This year, the HKMA has intervened 29 times and sold a total of HK$106.3 billion Hong Kong dollars to weaken the currency after hot money flooded in as investors chased mega IPOs.

The exchange rate is allowed to move within a trading band of 7.7500 to 7.8500. When it breaches either the upper or lower limit, the city’s de facto central bank, the HKMA, is mandated to either buy or sell the local currency to bring the exchange rate back within the band.

The Hong Kong dollar peg system is credited with sustaining Hong Kong’s economy during a number of major economic disasters including the Asian financial crisis and the severe acute respiratory syndrome epidemic in 2003. It remained intact even when the city was returned from British to Chinese rule in 1997.

While Yam agreed the US dollar and investment markets might be at risk of sharp declines, he insisted it would not affect the peg because it has happened in the past, and the system still worked smoothly.

He is also not worried about the US imposing sanctions that would damage the peg or the city’s capital markets. Washington has threatened to impose a penalty on Hong Kong and China in response to Beijing's enactment of the national security law last month, a move widely condemned as undermining the city’s autonomy.

Yam considers the new law essential to restore social order after months of damaging anti-government protests, and thereby protect Hong Kong’s image as an international financial centre.

While Hong Kong does not need Washington’s approval, the peg cannot work if the US cuts off the city’s government and financial firms from trading the US dollar. That, however, is viewed as a last resort that could trigger global financial turmoil, because Hong Kong is the third-largest US dollar trading centre worldwide, behind only the US and the UK.

“I hope clever politicians like Trump and Pompeo would not opt for the nuclear option,” Yam said.

Given the sheer size of the US financial system and dominance of the dollar, Yam said the US “has a powerful arsenal at its disposal”, but “deploying the powerful arsenal could well end up hurting itself badly.”

He therefore believes the possibility of the “weaponisation” of the financial system is low, with the US sanctions likely only to focus on certain individuals and firms.

The currency peg and the resilience of the city’s capital market is an anchor helping Hong Kong to weather its worst economic recession in decades. The city’s financial coffers comprise one of the world’s largest currency reserves, at US$445.9 billion as of the end of June.

The local government has handed out HK$300 billion (US$38.7 billion), or 10 per cent of economic output, to support an economy hammered by the Covid-19 pandemic and help residents survive the slump.

Yam described the rescue package as “entirely appropriate and affordable” but said there is room for more, when the figure is compared with the aid provided by some other regional governments – Singapore spent 20 per cent of gross domestic product on handouts, Thailand spent 13 per cent and Malaysia handed out 19 per cent.

“Hong Kong has zero debt,” he said, while its accumulated fiscal reserves amount to about HK$1.2 trillion (US$154.83 billion), he pointed out.

“The running of a large but temporary budget deficit would not erode the fiscal discipline in Hong Kong that has underpinned its status as an international financial centre.”

For Hong Kong to move forward after the pandemic, he said the Greater Bay Area project would be the key. Beijing unveiled the blueprint in February last year for the ambitious plan to integrate Hong Kong, Macau and nine Guangdong cities into an economic powerhouse.

To make it successful, Yam said it needs to encourage more capital flow. He suggests allowing Hong Kong banks to accept deposits and lend money in the Greater Bay Area’s mainland cities, and vice versa, while Beijing ring-fences the capital flow within the region to avoid the risks spreading to other parts of the country.

Newsletter

Related Articles

0:00
0:00
Close
UK Confirms Preferential U.S. Trading Terms Will Continue After Supreme Court Tariff Ruling
U.S. and U.K. to Hold Talks on Diego Garcia as Iran Objects to Potential Military Use
UK Officials Weigh Possible Changes to Prince Andrew’s Position in Line of Succession Amid Ongoing Scrutiny
British Police Probe Epstein’s UK Airport Links and Expand High-Profile Inquiries
United Kingdom Denies U.S. Access to Military Base for Potential Iran Strike
British Co-founder of ASOS falls to his death from Pattaya apartment
Early 2026 Data Suggests Tentative Recovery for UK Businesses and Households
UK Introduces Digital-First Passport Rules for Dual Citizens in Border Control Overhaul
Unable to Access Live Financial Data for January UK Surplus Report
UK Government Considers Law to Remove Prince Andrew from Royal Line of Succession
UK ‘Working Closely with US’ to Assess Impact of Supreme Court Tariff Ruling
Trump Criticises UK Decision to Restrict Use of Bases in Potential Iran Strike Scenario
UK Foreign Secretary and U.S. State Chief Hold Strategic Talks as Tensions Rise Over Joint Air Base
Two teens arrested in France for alleged terror plot.
Nordic Fracture: How Criminal Scandals and Toxic Ties are Dismantling the Norwegian Crown
US Supreme Court Voids Trump’s Emergency Tariff Plan, Reshaping Trade Power and Fiscal Risk
King Charles III Opens London Fashion Week as Royal Family Faces Fresh Scrutiny
Trump’s Evolving Stance on UK Chagos Islands Deal Draws Renewed Scrutiny
House Democrat Says Former UK Ambassador Unable to Testify in Congressional Epstein Inquiry
No Record of Prince Andrew Arrest in UK as Claims Circulate Online
UK Has Not Granted US Approval to Launch Iran Strikes from RAF Bases, Government Confirms
AI Pricing Pressure Mounts as Chinese Models Undercut US Rivals and Margin Risks Grow
Global Counsel, Advisory Firm Co-Founded by Lord Mandelson, Enters Administration After Client Exodus
London High Court dispute over Ricardo Salinas’s $400mn Elektra share-backed bitcoin loan
UK Intensifies Efforts to Secure Saudi Investment in Next-Generation Fighter Jet Programme
Former Student Files Civil Claim Against UK Authorities After Rape Charges Against Peers Are Dropped
Archer Aviation Chooses Bristol for New UK Engineering Hub to Drive Electric Air Taxi Expansion
UK Sees Surge in Medical Device Testing as Government Pushes Global Competitiveness
UK Competition Watchdog Flags Concerns Over Proposed Getty Images–Shutterstock Merger
Trump Reasserts Opposition to UK Chagos Islands Proposal, Urges Stronger Strategic Alignment
Greek Prime Minister Kyriakos Mitsotakis advocates for a ban on minors using social media.
Liberal Senator Michaelia Cash Accuses Prime Minister of Lying to Australians
Meanwhile in Time Square, NYC One of the most famous landmarks
Jensen Huang just told the story of how Elon Musk became NVIDIA’s very first customer for their powerful AI supercomputer
A Lunar New Year event in Taiwan briefly came to a halt after a temple official standing beside President Lai Ching‑te suddenly vomited, splashing Lai’s clothing
Jillian Michaels reveals Bill Gates’ $55 million investment in mRNA vaccines turned into over $1 billion.
Ex-Prince Andrew Mountbatten-Windsor's arrested
Former British Prince Andrew Arrested on Suspicion of Misconduct in Public Office
Four Chagos Islanders Establish Permanent Settlement on Atoll
Unitree Robotics founder Wang Xingxing showcases future robot deployment during Spring Festival Gala.
UK Inflation Slows Sharply in January, Strengthening Case for Bank of England Rate Cut
Hide the truth, fake the facts, pretend the opposite, Britain is as usual
France President Macron says Free Speech is Bull Sh!t
Viktor Orbán getting massive praise for keeping Hungary safe, rich and migrant-free!
UK Inflation Falls to Ten-Month Low, Markets Anticipate Interest Rate Cut
UK House Prices Climb 2.4% in December as Market Shows Signs of Stabilisation
BAE Systems Predicts Sustained Expansion as Defence Orders Reach Record High
Pro-Palestine Activists Cleared of Burglary Charges Over Break-In at UK Israeli Arms Facility
Former Reform UK Councillors Form New Local Group Amid Party Fragmentation
Reform UK Pledges to Retain Britain’s Budget Watchdog as It Seeks Broader Economic Credibility
×