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Strategies & Market Trends : HONG KONG
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To: Tom who wrote (864)11/12/1997 2:13:00 AM
From: synchro  Read Replies (1) of 2951
 
The effectiveness of the currency board system was never in doubt. The problem is whether the Hong Kong authorities have the political will to see thru this.

The next test of the H.K. peg is not going to come from the current bout of southeast Asian devaluation. That's in the past. The next test of the H.K. peg will take place when *Japan* finally devalue the yen. In my opinion, the Japanese are the ones that are running out of choices (banking and fiscal problems, et. al). When the Japanese devalues (the Yankees' howling be damned), then the Chinese would have to make a _political decision_ as to whether to devalue. If they do, the the Asian trading block's devaluation cycle would be complete.

Btw, the way H.K. authorities "unpeg" from the U.S. $$ would be to announce a "re-peg" of the Hong Kong dollar to the Reminbi. There will be a host of reasons offered to the world why this is the "economically sound" thing to do. Don't believe a word of it. It's an "unpeg".

Right now the whole currency devaluation thing is turning more and more political. Once that happens, rationality may not be something you can count on. All this just goes to show how fragile free trade & free markets really are. It would be tragic if the politicians make the wrong moves.
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