THURSDAY, APRIL 3, 1975
HONG KONG DOLLAR NOT REALISTIC TO REFIX NOW
* * * * * * * *
THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, TODAY SAID IT WOULD NOT BE REALISTIC TO REFIX THE HONG KONG DOLLAR UNTIL THERE ARE SIGNS THAT A MORE FUNDAMENTAL STABILITY HAS RETURNED TO THE INTERNATIONAL MONETARY SYSTEM.
+IN SUCHI CIRCUMSTANCES, I DO URGE UPON TRADERS THE DESIRABILITY OF TAKING FORWARD COVER TO PROTECT THEMSELVES AS FAR AS POSSIBLE FROM THE UNCERTAINTIES OF THE EXCHANGE RATE SITUATION THAT HAS DEEN FORCED UPON US, HE SAID WHEN WINDING UP THE BUDGET DEBATE.
MR. HADDON-CAVE STUCK TO HIS BELIEF THAT IN HONG KONG THE ECONOMY MUST, IN PRINCIPLE, ADJUST TO THE EXCHANGE RATE AND NOT THE OTHER WAY ROUND. THIS WAS BECAUSE EXTERNAL TRANSACTIONS FORMED A LARGE PROPORTION OF TOTAL TRANSACTIONS - THE VALUE OF TRANSACTIONS BEING MORE THAN THREE TIMES THE GROSS DOMESTIC PRODUCT.
WHILE HE REALISED THAT A STRONG OR STRENGTHENING HONG KONG DOLLAR AT A TIME WHEN ORDERS WERE HARD TO NEGOTIATE, WAS NOT HELPFUL IN THE SHORT TERM, HONG KONG'S INTERNAL COST-PRICE STRUCTURE WAS STADLE AND MAY EVEN BE FALLING A LITTLE, HE SAID.
HE THEREFORE DID NOT REGARD THE PRESENT SITUATION AS TOO UNSATISFACTORY, ALTHOUGH HE CONCEDED THAT AS HONG KONG'S ECONOMY BECOMES MORE SOPHISTICATED, THE ADJUSTMENT PROCESS WORKED THROUGH THE SYSTEM MORE SLOWLY THAŃ DEFORE.
SINCE
ON BUDGET DAY (FEBRUARY 26), HE NOTED, THE EXCHANGE RATE WAS ABOUT HK$4.64 TO THE U.S. DOLLAR IN INTERBANK TRADING. THEN, THE HONG KONG DOLLAR HAD WEAKENED FURTHER. BY COMPARISON, THE REVALUATION WAS FIVE PER CENT, AND 2-1/2 PER CENT COMPARED WITH THE RATE ON THE DAY DEFORE THE DOLLAR WAS FLOATED.
IN FACT, MR. HADDON-CAVE SAID, LOOKING AT THE CURRENCIES OF HONG KONG'S OTHER MAJOR TRADING PARTNERS (EXCLUDING THE U.S.) AND TRADING COMPETITORS, ON THE BASIS OF A TRADE-WEIGHTED INDEX, *WE FIND THAT THE HÔNG KONG DOLLAR IS NOW AT ABOUT THE SAME VALUE OVERALL AS DURING THE THREE OR FOUR MONTHS BEFORE WE FLOATED.+
HE SHARED THE BELIEF THAT THE U.S. DOLLAR HAD COME TO BE SERIOUSLY UNDERVALUED, AND SAID THE POSSIBILITY OF USING INTEREST TAX AS A POSITIVE REGULATOR HAD RECEDED A LITTLE. BUT HE FELT THAT IN THESE UNCERTAIN TIMES + MUST BE ALLOWED TO KEEP MY OPTIONS OPEN.+
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