TNAG-1483-FCO40-2037-Economic-situation-in-Hong-Kong-1986 — Page 26

1.9

While under the

linked

exchange rate system the

exchange rate of

rate of the Hong Kong dollar against the US dollar remained stable during the third quarter of 1986, its overall value measured in terms of the trade-weighted exchange rate This decline was index depreciated further (paragraph 3.2).

attributable

in

dollar in

Under the

an easing of

to the continued weakness of the US the foreign exchange market. During the third quarter, there was reportedly an inflow of funds into Hong Kong. linked exchange rate system, this resulted the Hong Kong dollar interest

interest rates (paragraph 3.14), more rapid credit expansion (paragraph 3.10), and an acceleration in the growth rates of the money supply (paragraph 3.9) and of deposits (paragraphs 3.3 and 3.4). Foreign currency deposits continued to grow at faster rate than Hong Kong dollar deposits.

1.10

а

Hong Kong

US dollar

dollar

Along with the easing of the interest rates during the third quarter, the differential

between the Hong Kong

and US the Hong Kong dollar and

interest rates

latter (paragraph 3.14). Both the widened in favour of the latter

Hong Kong

deposit rates set

the by

Hong Kong Association of Banks and the best lending rate offered by the

two

dollar

were

adjusted

further

downward in

note-issuing banks mid-August from their already low levels (paragraph 3.15).

4