WCURRENCY

← Back to converter

Overview

The Hong Kong Dollar (HKD), symbolised by HK$, is the official currency of Hong Kong. One dollar is divided into 100 cents. Unlike most currencies, HKD is not issued by a traditional central bank but through a currency board system managed by the Hong Kong Monetary Authority (HKMA).

Since 1983, the HKD has been pegged to the US dollar at a fixed rate of 7.80 HKD = 1 USD, with the HKMA maintaining a trading band of 7.75–7.85. This Linked Exchange Rate System (LERS) means Hong Kong's money supply automatically expands or contracts with capital flows, rather than through discretionary central bank policy.

Hong Kong is one of the world's leading financial centres, and HKD is the ninth most traded currency globally. Its stability under the peg has been critical to Hong Kong's role as a gateway between China and international capital markets.

History

Before the Hong Kong Dollar, Hong Kong used a variety of foreign currencies including the Spanish and Mexican silver dollar. The HKD was formally introduced in 1863, with the government issuing its own coins to replace the patchwork of circulating foreign specie.

Initially the HKD was on a silver standard, linked to the Chinese silver tael. When silver prices collapsed in the 1930s and global economies moved to gold, Hong Kong switched to a sterling peg in 1935 at 16 HKD = £1.

The sterling peg held until 1972, when Hong Kong switched to a USD peg. Between 1974 and 1983, the HKD floated freely — a period that ended in crisis: the 1983 Hong Kong gubernatorial crisis and uncertainty over Hong Kong's future after 1997 caused the dollar to plunge to 9.60 against the USD.

On 17 October 1983, the currency board and the 7.80 peg were introduced by Financial Secretary John Bremridge. The system immediately restored confidence. The peg has survived the 1987 crash, the 1997 Asian financial crisis, the 2003 SARS epidemic, the 2008 global crisis, and the 2019–20 protests and pandemic.

HKMA & the Currency Board System

The Hong Kong Monetary Authority (HKMA), established in 1993 by merging two existing bodies, serves as Hong Kong's de facto central bank. However, it operates a currency board rather than conventional monetary policy: every HKD in circulation must be 100% backed by USD held in the Exchange Fund.

Under the Linked Exchange Rate System, when HKD weakens toward 7.85, the HKMA buys HKD (selling USD), shrinking the monetary base and pushing rates higher. When HKD strengthens toward 7.75, the HKMA sells HKD (buying USD), expanding the base and lowering rates. Interest rates in Hong Kong therefore move in tandem with US rates, limiting independent monetary policy.

The Exchange Fund, managed by the HKMA, held over USD 400 billion in assets as of recent years — one of the largest per-capita reserve positions in the world. It successfully defended the peg during the 1997–98 Asian crisis, when speculators including George Soros attempted to break it.

Key Facts

• Three note-issuing banks — unlike most countries where only the central bank issues banknotes, in Hong Kong three commercial banks issue banknotes: HSBC, Standard Chartered, and Bank of China (Hong Kong). They must deposit equivalent USD in the Exchange Fund before printing.
• HK$10 coin — the government (not banks) issues the HK$10 coin and low-denomination notes, which are the smallest denomination managed outside the commercial bank system.
• 9th most traded — the HKD is consistently ranked 9th in global forex turnover according to BIS triennial surveys, reflecting Hong Kong's role as Asia's financial hub.
• Speculative attacks — in 1998, the HKMA controversially spent HK$118 billion (~$15 billion USD) to buy Hang Seng stocks and futures to defend the linked rate, subsequently selling them at a profit.
• Macau pataca — the Macanese pataca (MOP) is pegged to the HKD at 1.03 MOP = 1 HKD, making it indirectly pegged to USD as well.
• No capital controls — Hong Kong maintains complete capital account freedom, making HKD fully convertible and one of the world's most open currencies.

See also: USD – United States Dollar · CNY – Chinese Yuan · SGD – Singapore Dollar · Guide