Outgoing monetary chief sees no need to change peg policy
Updated: 2009-08-27 07:08
(HK Edition)
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HONG KONG: Joseph Yam, the outgoing head of the Hong Kong Monetary Authority (HKMA), said that there is no need to change the city's fixed exchange rate policy and that his successor will support the system.
The Hong Kong dollar has been kept at HK$7.8 versus the greenback since 1983 and from 2005 has been allowed to trade in a range of HK$7.75 to HK$7.85. It traded at HK$7.7505 yesterday. Norman Chan, named July 19 as Yam's successor, said that day he will maintain the peg to the US dollar, while expanding business in renminbi (yuan) in the city.
"The peg has been working well since 1983, stabilizing the currency's exchange rate," Yam, who steps down October 1, said in a briefing for reporters yesterday in Hong Kong. "The market has confidence in it. I believe Chan and the government will support the policy."
Hong Kong can play an important role by serving as a trial arena to help the mainland find its direction in moving toward being a free market, Yam said yesterday. He said that it will be a tough task for Hong Kong to maintain its status as an international finance center.
The People's Bank of China last month approved a trial scheme for five mainland cities to use yuan to settle cross-border trade with Hong Kong, encouraging companies to replace the US dollar in their transactions.
Tse Kwok Leung, a researcher at the Hong Kong branch of Bank of China Ltd, said on August 21 in Shanghai that Hong Kong companies settled only about 60 million yuan ($8.8 million) of trade with the mainland in the Chinese currency in the first month since the program started.
"The yuan's outlook is very good, as China is a very big country," Yam said. "But it's not a freely convertible currency. It will still take some time to become freely convertible."
Yam, 60, is Asia's longest-serving central bank chief, guiding the HKMA through Hong Kong's final years as a British colony into the post-handover era. He started his career as a government statistician in 1971.
Yam said that he doesn't have any plans for the next step in his career, though he would be happy to keep contributing to the country's development.
Bloomberg News
(HK Edition 08/27/2009 page4)