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3
economies.
However, this was not without limited inter-
vention at times to iron out wayward and erratic
fluctuations.
4.
Towards the end of 1982 the exchange value
of the Hong Kong dollar started to depreciate sharply,
reflecting amongst other factors uncertainies about Hong
Kong's future.
ค
The situation was not helped by wide
fluctuations in the exchange rates between major currencies,
a very strong US dollar and speculative activities.
By September 1983, the depreciation of the Hong Kong
dollar appeared simply to be feeding on itself. On two
days alone, 23 and 24 September 1983, amid mounting panic,
the exchange rate fell some 15% to stand at HK$9.60 to
the US dollar, compared with a rate of HK$6.15 to the
US dollar just a year earlier.
Such a sharp depreciation
was far greater than could be explained in terms of any
rational assessment of economic developments and future
prospects.
5.
Recognising that there was a serious risk of
further spiralling depreciation which would bring about
rampant inflation and distress to our community, and
recognising that the circumstances of Hong Kong preclude
exchange control, the Government then took the decision
to adopt the linked exchange rate system.
/The theory
G.F. 316
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