TNAG-1249-FCO40-1563-Press-reports-on-the-future-of-Hong-Kong-1983 — Page 126

V

it

HOFO 044/29

MICK040/2

RECEIVED IN AEGISTRY

5901 1903

00 FCO

DESK OFFSCR

GK 800

}

INDEX

PA

A to. Teken

RESTRICTED

FM HONG KONG 29085OZ SEP 83

TO IMMEDIATE FCO

TELEGRAM NUMBER 1442 OF 29 SEPTEMBER

PERSONAL FOR CLUFT FROM DREMH 1DGE.

TAY

·MAS MENTES

HD/HKD

ADVANCE CC:

IMMEDIATE

THE FOLLOWING ARTICLE PRINTED TODAY IN THE FAR EASTERN ECONOMIC REVIEW HIS FURTHER MATERIAL FOR YOU.

BEGINS.

A

HONG KONG: A WEEK OF DRAMA FOR THE HONG KONG DOLLAR MAY BE

LEADING TO THE MOST FAR-REACHING CHANCES TO HONG KONG'S MONETARY

SYSTEM SINCE THE CURRENCY WAS FLOATED IN 1974. AFTER FALLING

STEADILY IN THE TWO PRECEDING WEEKS BY 10 PERCENT AGAINST THE

U.S. DOLLAR TU HK DOLLARS 8.35:0.S. DOLLANS 1-IT NOSEDIVED

ANOTHER 45 MK CENTS TO SEPTEMBER 23 AND THE FOLLOWING MORNING

A SATURDAY SLUMPED TO 9.55. PANIC WAS IN THE AIR AND QUEUES

FORMED TO BUY GREENBACKS.

THE GOVERNMENT, WHICH HITHERTO HAD TAKEN THE VIEW THAT THE WEAK CURRENCY WAS A RESULT OF FOLITICAL FACTORS WHICH IT COULD DO

NOTHING TO ALTER, WAS AWOKEN. HONG KONG WAS WITNESSING NOT

JUST A WEAKENING CURRENCY BUT A LOSS OF CONFIDENCE WW THE

GOVERNMENT'S ABILITY TO MAINTAIN FPNANCIAL STABILITY OR AN

ORDERLY MARKET. IT WAS LONG PAST THE TIME WHEN PIOUS AFFIRMATIONS

THAT THE CURRENCY WAS ALREADY UNDERVALUED COULD HAVE ANY IMPACT.

THE BOTTOM LEVEL WAS ONLY MOMENTARY AND WAS MARKED EY-THIN

TRADING AND VERY WIDE SPREADS. SOME BANKS DECLINED TO DEAL AT ALL..

BUT WITH THE CURRENCY HAVING LOST SO MUCH IN SO SHORT A TIME THERE

WAS NO PREDICTING WHERO/INT MIGHT STOP LE EXISTING MARKET FORCES

WERE LEFT TO THEMSELVES.

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