Linked exchange rate system in Hong Kong
A linked exchange rate system in Hong Kong keeps the Hong Kong dollar (HKD) tied to the US dollar (USD). The Macao pataca (MOP) is also linked to HKD. Unlike a fixed rate, the government does not constantly steer currency supply and demand to set the rate. Instead, the peg is maintained by a currency board system run by the Hong Kong Monetary Authority (HKMA).
Banks can issue new HKD notes only if they deposit an equivalent value in USD with the HKMA, and the HKMA also issues HKD notes itself (including HKD 10 notes) to meet public demand. The system was adopted on October 17, 1983 after the Black Saturday crisis, pegging the HKD at 7.80 to 1 USD. The HKMA guarantees this exchange rate, with banks backing notes by USD deposits.
If the market rate moves away from 7.80, banks swap USD for HKD or HKD for USD with the HKMA. This changes the supply of HKD to push the rate back toward 7.80.
Hong Kong’s dollar is supported by very large foreign exchange reserves—roughly seven times the money in circulation and about 48% of HKD M3 as of April 2016.
Since September 5, 1998, the HKMA has promised to convert HKD in clearing accounts into USD at a fixed rate of HK$7.75 per US$1. Beginning April 1, 1999, the convertibility rate for the Aggregate Balance moved gradually and converged with the 7.80 rate on August 12, 2000. On May 18, 2005, the HKMA announced three refinements to clarify how far the exchange rate might strengthen under the Linked Exchange Rate System.
This page was last edited on 2 February 2026, at 14:11 (CET).