If the USD/CNY approaches 7.8, it will rekindle concerns about HKD’s dollar pegging. The Hong Kong Monetary Authority (HKMA) needs to reiterate its stance to prevent herd behaviour in the market, in the opinion of economists at ANZ Bank.

Policymakers unlikely to abolish the HKD’s dollar peg

“Unpegging HKD from the USD is undesirable amid current FX volatility, so we believe that policymakers will not abolish the HKD’s dollar peg.”

“USD/CNY is now above 7.20; a further weakening in the yuan may trigger some concerns about the HKD peg.”

“To cope with market noises, Hong Kong policymakers need to reiterate their defence of the peg so that herd behaviour will not trigger massive capital outflows.”