TheexchangeratesysteminHongKong.pptVIP

The exchange rate system in Hong Kong Linked exchange rate system Hong Kong is a…… Trading Centre International Financial Monetary Centre What is the reason make Hong Kong so Successful? The Linked exchange rate system History of Exchange Rate System in Hong Kong History of Exchange Rate System in Hong Kong History of Exchange Rate System in Hong Kong History of Exchange Rate System in Hong Kong What is Linked Exchange rate System? Currency broad system Pegged the Hong Kong Dollar to the USD at the rate of 7.80 Two exchange currency markets in HK (Exchange Fund and open market ) Ways to fixed the exchange rate at HK$7.8 = US$1 Arbitrage activities Different in the price of a good in different market Buy the product at the lower price market Sell it at the higher price market Two kinds of arbitrage activities in exchange rate system Interest rate arbitrage Currency arbitrage Interest rate arbitrage Determined by demand and supply Speculation against HK Dollar Demand for HK Dollar would then decrease HK Dollar would depreciation against USD in open market Domestic interest rate would rise and this would attract back the funds Demand for the HK Dollar would rise Exchange rate would be stabilized Interest rate arbitrage Speculation for HK dollar Demand for HK dollar would rise Exchange rate of HK dollar to US dollar would increase in open market Domestic interest rate would then fall Demand for HK dollar would fall Exchange rate of HK dollar would be stabilized Currency arbitrage Exchange rate of HKD fall in open market Exchange rate fixed in the close market Different of HKD to USD in open market How does bankers gain profit? Sell USD for HK Dollar in open market Sell HK Dollar for USD in Exchange Fund Exchange rate of HK Dollar for USD would be stabilized Why the linked exchange rate system important to HK ? Suits the needs of a highly open economy such as Hong Kong’s Enables Hong Kong to adjust to shocks without the damage and vo