Politics and the peg

It is becoming increasingly likely that the Hong Kong government will have to bring to an end the link between the Hong Kong dollar and the US dollar. The Hong Kong Monetary Authority has used large-scale intervention in the stock, currency and futures markets as a way of avoiding raising interest rates, and has thus given up its main weapon in defending the US dollar peg. However, ordinary people in Hong Kong still have faith in the Hong Kong dollar, and this is key element in maintaining its integrity.