TNAG-1267-FCO40-1616-Economic-situation-in-Hong-Kong-1983 — Page 189

The foreign exchange market

3.10

Despite rather wide fluctuations

wide fluctuations in exchange rates between major currencies, the trade-weighted exchange rate

(8) index

for the Hong Kong dollar was relatively stable during the first quarter after the sharp adjustment in the previous one. Calculated on the basis of 1981 trade weights,

the index, which was 79.5 at the end of 1982, fluctuated

during the quarter in the range of 79.3 to 78.2, being at its

firmest in the two weeks ahead of the Chinese New Year. At

the end of March the index stood at 78.4, representing a net

depreciation of 1.4% over the quarter. The import-weighted

index fell by 1.4% and the export-weighted index by 1.6%.

Renewed downward pressure on the Hong Kong dollar developed in the second quarter.

/3.11 Against

(8) In January 1983 the Census and Statistics Department introduced revised weights in the calculation of the trade-weighted exchange rate index for the Hong Kong dollar. The new weights reflect the pattern of Hong Kong's visible trade in 1981, whereas the calculation prior to January 1983 used weights derived from Hong Kong's trade in 1972. The index continues to be based on 18th December 1971 = 100.

The trade-weighted exchange rate index is an indicator of the average position of the Hong Kong dollar against a fixed basket of other currencies. The 15 countries whose currencies are included are selected on account of their importance in Hong Kong's trade and world trade, and the weights reflect the relative importance of the 15 countries in Hong Kong's visible trade. Thus, the weight for the US dollar has been reduced from 27.2% to 23.1%, reflecting a reduction in the relative importance of trade with the United States, while the marked increase in Hong Kong's trade with China has led to an increase from 10.6% to 18% in the weight attached to renminbi.

Despite some significant changes to the weights of individual currencies, the revised series is little different, as the following comparisons for earlier dates show:

Trade weighted index

calculated with

1972 weights

Trade weighted index

calculated with

1981 weights

!

As at end of

1981

85.9

85.2

1982

80.1

79.5

1983

Jan

79.8

79.0

Feb

N.A.

78.7

Mar

N.A.

78.4

N.A.

not available

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