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20951
4.
DESPITE SIGNIFICANCE OF OTHER FACTORS (EG STRENGTH WORLD- WIDE OF US DOLLAR AND SOME SPECULATIVE ACTIVITY) MAIN CAUSE OF
UNDERLYING DEPRECIATION OF HONG KONG DOLLAR HAS BEEN UNCERTAINTY
ABOUT HONG KONG'S FUTURE. THIS EXACERBATED BY INTENSIFICATION
OF CHINESE PROPAGANDA CAMPAIGN AND HAS LED TO A MOVE OUT OF
HONG KONG DOLLARS. THROUGHOUT PAST YEAR, HONG KONG GOVERNMENT HAS SOUGHT TO SMOOTH FLUCTUATIONS THROUGH EXCHANGE FUND, BUT
WITH ONLY LIMITED EFFECT. RECENT SHARP DEPRECIATION HAS
THEREFORE RESULTED IN FOLLOWING MOVES:
(A)
STATEMENTS BY HONG KONG GOVERNMENT DESIGNED TO POINT UP
THAT PRESENT RATES QUOTED FOR HONG KONG DOLLAR INCONSISTENT WITH
UNDERLYING ECONOMIC/POLITICAL SITUATION.
(B) INTERVENTION BY EXCHANGE FUND ON SUBSTANTIAL SCALE. (DETAILS CANNOT OF COURSE BE GIVEN)
(C) DEPOSIT INTEREST RATE RAISE OF 3 PER CENT BY HONG KONG
ASSOCIATION OF BANKS WITH CONSEQUENTIAL INCREASE IN LENDING
RATES.
5. FOR CANBERRA. IF THERE ARE ANY SIGNIFICANT DEVELOPMENTS
BETWEEN NOW AND THE MINISTER'S ARRIVAL IN CANBERRA WE SHALL
TELEGRAPH AGAIN.
HOWE
FUTURE OF HONG KONG
LIMITED
HID/EX D
ED/FED
HD/PLANNING STAFF
HD/PUSD
PS
PS/LADY YOUNG
PS/MR LUCE
PS/PUS
SIR J BULLARD
MR GIFFARD
MR DONALD
MR WRIGHT
COPIES TO
-
1
SIR IAN SINCLAIR LEGAL ADVISER LEGAL ADVISER
MR BURROWS
MR ROBERTS
MR HALLETT MR. MARTIN
MR FLOWER
MR COLES
SIR A PARSONS
MR WALKER
NEWS D
ESID
ASSESSMENTS STAFF
CABINET OFFICE
PUSD
NO 10 DOWNING STREET
NO 10 DOWNING STRENT
RESEARCH D OAB 2/82
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