XN000022-1978-07-19 — Page 2

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VALUE OF HONG KONG DOLLAR ****

WEDNESDAY, JULY 19, 1979

THE HONG KONG DOLLAR HAS DEPRECIATED BY ABOUT 12 PER CENT SIL.CE THE END OF 1976 IN TERMS OF THE PUBLISHED EFFECTIVE EXCHANGE RATE INDEX WEIGHTED AGAINST THE CURRENCIES OF OUR 15 PRINCIPAL TRADING PARTNERS.

THIS WAS STATED BY THE ACTING FINANCIAL SECRETARY, THE HO¡.. DAVID JORDAN IN THE LEGISLATIVE COUNCIL TODAY IN REPLY TO THE HON. JAMES NU WHO ASKED THE GOVERNMENT TO COMMENT ON THE CURRENT VALUE OF THE HK DOLLAR IN RELATION TO THE CURRENCIES OF OUR

AJOR TRADING PARTNERS.

"R. JORDAN SAID THE DEPRECIATION, HAD OCCURRED DESPIT E THE VERY LITTLE CHANGE IN THE EXCHANGE RATE OF OUR DOLLAR WITH THE US DOLLAR DURING THE LAST 12 MONTHS.

+THIS DOWNWARD MOVEMENT IN THE EFFECTIVE EXCHANGE RATE IS PART OF THE ADJUSTMENT PROCESS OF THE ECONOMY AND IS LIKELY TO HAVE A NUMBER OF IMPLICATIONS FOR OUR TRADE AND ECONOMY VR. JORDAN SAID.

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HE SAID THE DEPRECIATION OF OUR DOLLAR WOULD TEND TO IMPROVE OUR EXPORT COMPETITIVENESS TO SOME EXTENT AGAINST EXPORTS FROM COUNTRIES WHOSE CURRENCIES HAD APPRECIATED SUBSTANTIALLY. +BUT SUCH IMPROVEMENT WILL OF COURSE BE LIMITED BECAUSE OF THE HIGH IMPORT CONTENT OF OUR EXPORTS,+ HE ADDED.

ANOTHER IMPLICATION, MR. JORDAN SAID, IS THAT IMPORTS GENERALLY WILL TEND TO BECOME MORE EXPENSIVE IN TERMS OF THE HK DOLLAR BUT THIS TENDENCY HAS SO FAR BEEN LARGELY OFFSET 3Y STEADY OR DECLINING WORLD EXPORT PRICES OF INDUSITRAL IMPORTS. HE ALSO POINTED OUT THAT THE UPWARD PRESSURE ON DOMESTIC PRICE LEVEL FROM THIS SOURCE HAS CONSEQUENTLY BEEN LIMITED.

+THE CURRENT PICK UP IN OUR EXPORT TRADE AND THE EXPECTED SLOWING DOWN OF THE GROWTH RATE : THE DOMESTIC SECTOR COULD HELP TO STABILISE THE INDEX,+ R. JORDAN SAID.

+THE RECENT DECISION BY THE BANKS HERE TO RAISE THE IR INTEREST RATES MAY ALSO MAKE SOME CONTRIBUTION TO THIS PROCESS, + HE ADDED.

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