Hong Kong Dollar Currency | Interesting Facts About the HKD

The unique city-state of Hong Kong circulates the thirteenth most traded currency in the world and the third most active one in Asia. In the foreign exchange market, the Hong Kong dollar (HKD) which is also used in the neighboring Macau, is a significant currency. 

The Forex market is the place for trading with a broad range of currencies, including the major and exotic ones. The most popular currencies are USD, CAD, GBP, EUR, AUD, JNY. However, some investors go for more sophisticated choices because of current political events, economic turbulences, or personal preference. The Hong Kong dollar is such a choice for Forex traders.

The Economy Behind the Hong Kong Dollar

As an autonomous region which is officially part of China but holds a high level of independence in a variety of aspects, Hong Kong has a small but free economy according to the Index of Economic Freedom’s standards.

Its economic performance revolves around 5 percent GDP and above which sometimes hits a 10 percent figure. Its development has been volatile over the past two decades and inflation is unpredictable.

In terms of performance, the Hong Kong Stock Exchange is the sixth largest stock exchange in the world with a market capitalization of $3.325 trillion dollars. Its cheap taxes and minimal business barriers make the state a significant trading and financial hub in Asia and in the globe. 

What makes Hong Kong's currency unique?

  1. Uses a USD-linked exchange rate system
    It uses a regime rate for the Hong Kong dollar to be pinned with the US dollar at a fixed rate of 7.80HKD = 1USD. In this exclusive bond, the Hong Kong Monetary Authority (HKMA) allows HSBC, Bank of China and Standard Chartered banks to issue HKD banknotes provided that they upload an equivalent value of US dollars with HKMA. 
  2. Not an especially tradable currency
    The HDK moves in a fraction-of-a-penny which needs particularly fast computers to profit from in trading. Hong Kong dollar-based transactions are mostly intended for the actual business transactions or the carry trade.
  3. Attractive carry trade currency
    The HKD attracts global carry trade capitalists for its low interest rates. Speculators borrow cheaply in Hong Kong dollars and buys higher-earning debt in countries like New Zealand or Australia. 
  4. Points to an inevitable extinction
    There is a good chance for the Hong Kong dollar to become irrelevant and probably die. This is because of the possibility of China lifting its currency controls to develop economically, leaving no obvious role for the Hong Kong dollar.

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Written by:
Omer Aragón Godínez

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