TNAG-0453-FCO40-518-Budget-of-Hong-Kong-1974-1975-1975 — Page 108

Exchange Value of the Hong Kong Dollar

52. In July 1972, the traditional link between the Hong Kong dollar and the pound sterling was replaced by the establishment of a direct link with the United States dollar. A central rate of HK$5.65/US$1 was established on 6th July; the rate is permitted to move within 24 per cent either side of the central rate. In February 1973, the United States dollar was devalued by 10 per cent and, effective from 15th February, the central rate became HK$5.085/US$1.

53. Diagrams 2 and 3 show the movement of the United States dollar in Hong Kong for the periods 8th July 1972 to 10th February 1973 and 15th February to 31st December 1973 respectively and it will be seen that, during the second half of 1972 and for the first four months of 1973, the Hong Kong dollar tended to be relatively weak against the United States dollar. But this was to be expected in view of the large net outflows of funds through the foreign exchange market at this time.

Diagram 2 Hong Kong Dollar/US Dollar Rate Movements, 8 July 1972-10 February 1973

HKS/US$1

(Central rate HK$5.65=US$1)

5.5229

5.5300

5,5500

5.5700

5.5900

5.6100

5.6300

5.6500

5.6700

5.6900

5.7100

5.7300

5.7500

5.7700

5.7771

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

1972

1973

17