first half of 1983 (paragraph 3.4) reflecting slower growth of
loans and advances (paragraphs 3.8 and 3.9), and the rate of
increase in world prices was moderate. However, the
depreciation of the Hong Kong dollar in the second quarter of this year may have an adverse effect on the rate of inflation
in due course.
1.9
The monetary aggregates continued to be affected by a number of special factors during the first half. The foreign currency component of the money supply, which was
buoyed by "swap" deposits (which have no effect on the exchange rate) and by the weakness of the Hong Kong dollar
(paragraph 3.6), grew at a faster rate than its Hong Kong dollar counterpart. The switch of deposits from registered
deposit-taking companies to banks continued, albeit at a
slower rate than during 1982 (paragraph 3.5), as the two year
transitional period for the establishment of the three-tier
structure (paragraph 3.2) came to an end.
1.10
The exchange value of the Hong Kong dollar, measured
either in terms of the trade-weighted exchange rate index or
in terms of the US dollar, weakened during the first half of 1983 (paragraphs 3.13 and 3.14). During the second quarter,
the market was
was affected by nervous political sentiment, the
general strength of the US dollar and speculative activities
(paragraph 3.1). To lend
lend support to the Hong Kong dollar,
local interest rates were adjusted upwards, first in April and
again in May (paragraph 3.10).
4