maturity of the deposit, the monetary sector's forward foreign
currency assets also increase. Changes in the spot and
not, however, a precise measure of
forward positions are "swap" activity.
The foreign exchange market
1983.
3.13
In contrast to the sharp decline experienced in the
second half of 1982, the exchange value of the Hong Kong dollar was relatively stable during the first quarter of
The trade-weighted exchange rate index(12)
calculated on the basis of 1981 weights, fluctuated within a
fairly narrow range between
range between 78.2 and 79.3. Even against the
rather volatile US dollar, which, for example, experienced a
10% fluctuation against sterling and a 6% fluctuation against the Yen, the range was between $6.50 to $6.74 per US dollar.
During the second quarter, however, the Hong Kong dollar was
under considerable downward pressure. From 78.4 at the end of
March, the trade-weighted exchange rate index fell sharply to
a record low of 70.3 on 8 June, with the exchange rate against
the US dollar touching $7.70 per US dollar on the
the same day.
This movement was generally considered to be excessive in terms of the underlying economic fundamentals which have been clearly indicating an export-led economic
Pessimistic sentiment prevailed in the foreign exchange
market. This was associated with uncertainty surrounding the political future of Hong Kong and was abetted by a strong US dollar, unsettled foreign exchange markets worldwide and some speculation. Given the strength of the other factors, the two interest rate adjustments in April and May probably had only a
limited stabilizing effect.
recovery.
(12)
/3.14 A change
See footnote (8) in Chapter 3 of the First Quarter Economic Report 1983.
31
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